Integrated Report 2013 - JSE€¦ · Group profile 6 Our geographic footprint 7 Group snapshot 8 Living our values 10 Our strategy 11 Our strategy 12 Material issues 14 Stakeholder

Integrated Report 2013

ContentsDefinitions IFC

Highlights and milestones 1

Five-year review 2

Our investment case 2

About this report 3

Group at a glance 5

Group profile 6

Our geographic footprint 7

Group snapshot 8

Living our values 10

Our strategy 11

Our strategy 12

Material issues 14

Stakeholder engagement 16

Leadership 19

Directorate 20

Chairman’s report 22

CEO’s review 24

CFO’s report 26

Ethical leadership 29

Governance 31

Corporate governance 32

Risk report 37

Remuneration report 38

Our impacts 39

Value-added statement 40

Our people 41

Transformation 51

Our environment 53

Independent assurance statement 54

Annual financial statements 56

Shareholder information 125

Analysis of shareholders 126

JSE performance 127

Shareholders’ diary 127

Notice of annual general meeting 128

Form of proxy 137

King III Application 139

GRI index 145

Contact information 152

Corporate information IBC

Stakeholders’ navigation guideThis integrated annual report is intended to serve all of the Group’s stakeholders. The stakeholders’ navigation guide is designed to assist each stakeholder Group in identifying and easily accessing relevant areas in this integrated annual report that specifi cally address its individual interests.

Shareholders/investors


Five-year review 2

Group at a glance 5

Our strategy 12

Leadership 19

Governance 31


Lenders/providers of capital


Group at a glance 5

Our strategy 12

Leadership 19

Governance 31


Employees

Our strategy 12

Leadership 19

Governance 31

Our people 41

Business partners (customers)

Group at a glance 5

Our strategy 12

Leadership 19

Governance 31

Our impacts 39


Suppliers

Our strategy 12

Leadership 19

Governance 31

Our impacts 39


Defi nitions

“AA1000AS” AA1000 Assurance Standard

“AltX” Alternative Exchange of the JSE Limited, on which Morvest listed in 2004 prior to transferring to the JSE Main Board on 20 June 2011

“BBBEE” Broad Based Black Economic Empowerment

“BEE” Black Economic Empowerment

“B2B” Business-to-Business markets, in which Morvest historically operated with a focus on Professional Services, ICT and Outsourcing Sectors

“B2C” Business-to-Consumer markets, into which Morvest has diversified with a focus on Retail and Consumer Services and Property Investments

“BIG” SAB&T Business Innovations Group Proprietary Limited, which was disposed of by Morvest subsidiary SAB and T Ubuntu

“the board” The board of directors of Morvest Business Group Limited

“Business Support Services”

Business segment including Professional Services and Outsourcing Solutions divisions

“CEO” Chief Executive Officer, Mohammed Varachia

“CFO” Chief Financial Officer, Suren Singh

“CLO” Chief Legal Officer

“CRM” Customer Relationship Management, an IT system for managing interactions with existing and future customers

“the Codes” Department of Trade and Industry’s BBBEE Codes of Good Practice

“the Companies Act”

South African Companies Act, 71 of 2008, as amended

“the current year”

The year ending 31 May 2014

“EXCO” Executive Committee of Morvest Business Group Limited

“PPPFA” Preferential Procurement Policy Framework Act, No 5 of 2000

“GRI” Global Reporting Initiative

“the Group” Morvest Business Group Limited, its subsidiaries and associates

“ICT” Information, Communications and Technology

“IFRS” International Financial Reporting Standards

“ISAE 3000” International Standards on Assurance Engagements

“iSolve” iSolve Business Solutions Proprietary Limited, a Microsoft Gold Certified Partner, 60% of which was acquired by ITQ BS effective 1 March 2013

“SQLDB” SQLDB Technology Solutions Proprietary Limited, provider of resourcing and contracting which was acquired by ITQ BS effective 1 March 2013

“ITQ BS” ITQ Business Solutions Proprietary Limited, a 50,01% subsidiary in Morvest’s ICT Solutions segment

“JSE” Johannesburg Securities Exchange, part of JSE Limited and the main bourse in South Africa

“King III Report”

King Report on Corporate Governance for South Africa, 2009

“MoI” Memorandum of Incorporation, which comprises the company’s existing memorandum of association and its articles of association

“Morvest” or “the company”

Morvest Business Group Limited, the Group holding company listed on the Main Board JSE in the “Business Support Services” sector

“PPP” Public-private partnership, a Government service or private business venture which is funded and operated through a partnership of Government and the private sector

“the previous year” or “the prior year”

The year ended 31 May 2012

“SENS” The JSE’s real-time news dissemination service

“SHEQ” Safety, health, environment and quality

“SAB and T Ubuntu”

SAB and T Ubuntu Holdings Proprietary Limited, a subsidiary of Morvest’s Business Support Services segment, within Professional Services division

“Telco” Any telecommunications operator company that provides telephony and data communications access

“the year” or “the year under review”

The year ended 31 May 2013

Financial definitions

“EBITDA” Earnings before interest, taxation, depreciation and amortisation

“HEPS” Headline earnings per share

“NPAT” Net profit after tax

“PAT” Profit after tax

Morvest Integrated Report 2013 1

Highlights and milestones

Be more, do more and achieve more for our stakeholders.

Our name embodies our philosophy:

“more”

VisionProsperity through exceptional people, products and services.

MissionProvide exceptional solutions to contribute to our customers’ success.

Successfully promote and enhance a performance-driven, innovative culture, where staff are passionate, motivated and empowered to maximise their full potential.

Create sustainable shareholder value.

Actively contribute towards social upliftment and environmental sustainability.

BEE transaction initiated

311 employees trained

R2,4 million invested in social upliftment and enterprise development.

Diversifi cation to investment holding group progressing well

Gross dividend of

1 cent per share

Net tangible asset per share up from

1,47cent to12,8 cent

EBITDA

+26%

Revenue

+10%

Headline earnings

+12%

IRAS (Integrated Reporting

and Assurance Services)

award for top reporter in the

Services and Other sector


Five-year review

• Quality of business

• Eight-year consistent revenue and profi t growth

• Prudent, fi nancial policies across Group

• Solid risk management process

• Over 1 500 employees worldwide

• Diversifi ed offerings = diversifi ed risk

• Subject specialists in our niche markets

• National and expanding international footprint

• Global customer and supplier network

• Partnership with credible global giants – Intergraph, Oracle, Microsoft

• Strong management and strategic leadership

• Blend of entrepreneurial spirit and ambition with experienced business resources

• Management’s material equity = personal investment

• Strong cash fl ows

• Agile and resilient

Our investment case

Headline earningsR’000

0

10 000

20 000

30 000

40 000

50 000

60 000

20132012201120102009

EBITDAR’000

0

30 000

60 000

90 000

120 000

150 000

20132012201120102009

* Permanent

Number of staff*

0

260

520

780

1 040

1 300

20132012201120102009

Turnover historyR’000

0

200 000

400 000

600 000

800 000

1 000 000

20132012201120102009

Average growth rate of 11% over fi ve years.

Average growth rate of 11% over fi ve years.


About this report

Morvest is a black empowered diversifi ed investment holding Group listed on the Main Board JSE in the “Business Support Services” sector. The Group operates and reports through three core business segments: • Business Support Services • ICT Solutions• Retail and Consumer Services

Morvest’s geographic footprint spans Africa (including South Africa, Mozambique and Nigeria), India, UAE and the USA. The Group has offi ces in all major South African cities as well as Maputo, Mozambique and Lagos, Nigeria. During the year Morvest began the process of acquiring premises in Dubai, UAE.

Scope of this reportThis, our third integrated annual report, presents the fi nancial results and the environmental, social and governance performance of the Group for the year 1 June 2012 to 31 May 2013, and follows our prior integrated annual report published in August 2012.

The content included in this integrated annual report endeavours to identify and explain the material issues the Group faces and provides a clear understanding of the economic, environmental, social and governance initiatives of the Group and their impact. This should enable stakeholders to accurately evaluate Morvest’s ability to create and sustain value over the short, medium and long-term.

Morvest’s scope of reporting on its sustainability initiatives extends to the Group holding company and its reportable business segments (including subsidiaries and associates), namely Business Support Services; ICT Solutions; and Retail and Consumer Services. By excluding the USA and India operations, there is no impact on the completeness principle of the report given that these offi ces and divisions do not as yet contribute signifi cantly to Group performance and were not exposed to material risks during the year under review. The supply chain and outsourced functions have not been assessed for the purposes of this report. This will be considered in future reports.

There have been no signifi cant changes in the scope, boundary or measurement methods applied in preparing this report and there have been no restatements of previously reported information.

Signifi cant events during the yearDuring the year Morvest initiated a signifi cant BEE improvement initiative that was realised post year-end. The BEE transaction empowers key management and employees through a signifi cant stakeholding in the company and secures their long-term commitment to the company. It is designed to secure a sustainable BEE platform for Morvest while at the same time aligning the interests of the key drivers of Morvest’s success with those of the company.

Morvest disposed of 100% of the shares and claims in BIG, a subsidiary of Morvest company SAB and T Ubuntu effective 1 November 2012.

Morvest indirectly acquired 60% of iSolve – a Microsoft Gold Partner – and SQLDB – a resourcing and contracting provider – through ITQ BS effective 1 March 2013.

Corporate informationThe Group’s Executive Directors are Mohammed Varachia (CEO), Suren Singh (CFO), Madoda Papiyana (HR Director) and Alex Evan (CLO). They can be contacted at the registered offi ce of the company (see IBC).

Key dataMorvest Business Group Limited (Registration number: 2003/012583/06)ISIN: ZAE000152567JSE Main Board sector: Business Support Services Share code: MORListing date: 2004 on AltX, transferred to

JSE Main Board 20 June 2011

Shares in issue: 679 158 612 (at 31 May 2013)Business segments: Business Support Services

(including Professional Services and Outsourcing Solutions), ICT Solutions; and Retail and Consumer Services.

A hard copy of this integrated annual report is available on request from the Company Secretary, and is also posted online at www.morvest.co.za.

Company Secretary: Noelene JanuaryEmail: [email protected]: +27 11 231 1300Fax: +27 11 234 8023

For additional contact details please see the IBC. We welcome your feedback and any suggestions you have for our reports in future. Please forward any comments to the Company Secretary.

Applicable reporting requirements This integrated annual report is prepared in accordance with IFRS, the Listings Requirements of the JSE and the Companies Act. Morvest complies in all material respects with the principles contained in the King III Report, as encapsulated in the applicable regulations. Any King III principles which are not applied are explained.

The integrated annual report was further prepared based on principles and guidance from the GRI and the relevant Sector Supplement (collectively, the GRI G3.1 Guidelines), and is compiled based on a self-declared Application Level C.


About this report (continued)

AssuranceIndependent “limited assurance” was obtained from Grant Thornton (Jhb) Inc. in terms of ISAE 3000 on selected sustainability information in order to assess whether this integrated annual report (inclusive of the supplemental GRI Content Index Table on page 145), has been prepared in alignment with the AA1000APS (2008) principles (inclusivity, materiality and responsiveness) as well as to assess whether the Group’s self-declaration of a C application level is fairly stated in all material respect, in accordance with the GRI G3.1 Guidelines. Their Assurance Statement can be obtained from the Company Secretary or found on page 54 of this report.

The combined assurance model of the Group in its current format is set out below:

Business process Nature of assurance Status Assurance providerIntegrated annual report disclosure

Annual Financial Statements Unqualified audit Assured PKF (Gauteng) Inc. 60

BBBEE BEE scorecard Assured BEESCORE 51

Sustainability information

Independent assessment Assured Grant Thornton (Jhb) Inc. 54

Process for defi ning report contentMorvest has considered and applied many of the recommendations contained in the Discussion Paper on the Framework for Integrated Annual Reporting and the Integrated annual report issued by the Integrated Annual Reporting Committee of South Africa in January 2011, and the Draft International Integrated Annual Reporting Framework. The integrated annual report was further prepared based on the principles of the GRI.

Within this framework the principles of materiality, responsiveness and inclusivity have defi ned content, with the Group endeavouring to identify, prioritise and review the material issues which impact on its operations and which in turn are impacted thereby.

In compiling this report EXCO attended a workshop facilitated by an external consultant, at which Group strategy, shareholder engagement, material issues and other relevant matters were interrogated and classifi ed.

Responsibility statement The Audit and Risk Committee acknowledges its responsibility on behalf of the board to ensure the

integrity of this integrated annual report. The committee

has applied its mind to the report and believes that it

appropriately and suffi ciently addresses all material

issues, and fairly presents the integrated performance of

Morvest and its subsidiaries and associates for the year

within the scope and boundary above. The Audit and Risk

Committee recommended this integrated annual report to

the board for approval.

Forward-looking statementsThis integrated annual report contains forward-looking

statements that, unless otherwise indicated, refl ect the

Group’s expectations as at 31 May 2013. Actual results

may differ materially from the Group’s expectations.

The Group cannot guarantee that any forward-looking

statement will materialise and, accordingly, readers are

cautioned not to place undue reliance on any forward-

looking statements. The Group disclaims any intention

and assumes no obligation to revise any forward-

looking statement even if new information becomes

available, other than as required by the JSE Listings

Requirements.

Professor Ben Marx Mohammed Varachia Suren SinghAudit and Risk Committee Chairman CEO CFO

18814th Road, Noordwyk, Midrand, 1685Our new Address

Groupat a glance


Group profi le

The Group employs approximately 1 590 people. Integral to our growth and diversifi cation strategy is further expansion, both sectorally and geographically into Africa and worldwide.

In line with this, the year saw exciting growth in our newest business unit – Retail and Consumer Services. The Group’s growing property portfolio continued to target retail, commercial and residential properties in Africa and the Middle East.

Our focus is securing businesses that replicate our culture of entrepreneurship with global reach. The key to our

into Morvest

“mor(e)”We are all about putting

In South Africa we are purposefully securing

our competitive advantage by becoming MORE

empowered. A BEE transaction is underway to

increase our direct black management ownership

to 52% and ensure our leadership is equally as

vested in the Group’s success and sustainability

as our other stakeholders.

success to date has been targeting companies that stand out in their sectors due to their competitive offering and established annuity income streams.

We partner with global technology and other leaders in our niche areas of operation to strengthen our preferred services for clients across the range of scale and industry, and in public and private sectors. We offer a single niche service or combine our expertise for comprehensive bespoke solutions, with the fl exibility and range entrenching our position as a leading business support provider in the B2B space.

Operational structure

Retail and Consumer

Services

ICTSolutions

Business Support Services

OutsourcingSolutions

ProfessionalServices

• Advisory

• Consulting

• Governance

• Human Capital

Management

• Training

• SIM Packaging and

Fulfi lment

• Secure Print Solutions

• Consumable Supplies

• Business Application

Solutions

• Consumer and Mobile

Solutions

• Information Intelligence

• Infrastructure and

Managed Services

• Resourcing and

Contracting Provider

• Financial Services

• Travel and Event

Management

• e-Commerce Retail

Solutions

• Exclusive Concierge

Services

• Property Portfolio

Mozambique

United States

Nigeria

Ghana

UAE

South Africa

India

New Delhi

iqueubi

DDD

Moozamboza

States

N

GGhahana

Nigegereririaaaa


Our geographic footprint

Gauteng

CenturionMidrand

Western Cape

Limpopo

KwaZulu-Natal

Eastern Cape

Port ElizabethPort St FrancisMossel Bay

Northern Cape

Free State

North WestMpumalanga

Polokwane

Nelspruit

DurbanUmhlanga RidgeBloemfontein

Kimberley

Cape Town

Bloemf

bUm

PPPorPPortl Bayl

WWWWCCCCaC

t

poPPPPoP

eng

DDDurDDDDUUUUUU

South Africa

Current footprint Expansion during the year

Short-term expansion goal

Long-term expansion goal

For full contact information, go to page 152.


Group snapshot

Packaging and fulfilment • Packaging and mass customisation for

SIMs, CDs, DVDs, loyalty cards and scratch cards

• Mailing solutions including chip/magstrip reading and matching functionality

• Blister packaging• Paper based packaging• Flow wrapping for the SIM and loyalty card

industries

Secure print solutions • Scratch cards• Eco vouchers • Secure plastic cards • Specialty labelling solutions• PIN mailers

Consumables • Niche manufacturing consumables

Key capabilities and services

Market

Advisory• Due diligence services• Business continuity planning• Business performance improvement• Organisational restructuring

Training • PRINCE2• COBIT• ITIL• Service excellence programmes

ConsultingBusiness and software solutions through: • Management consulting• Technology and integration • Transformation consulting• Strategy realisation

Financial ServicesIncludes the re-selling and executing of bespoke financial services products

Governance• IT audit • Risk management • Governance and adherence • Audit Committee • Performance audit• Governance frameworks

Human Capital Management• Outsourced professional (contracting)• Permanent staffing solutions• Executive search• Response handling• Verification services• Project/services-based resourcing• Training

Professional Services Outsourcing Solutions

B2B B2B

Business Support Services

Operational division

Contribution to revenue

59%

Number of staff

614


Business Application Solutions Software solutions that connect businesses to the ecosystem of partners, customers, suppliers, employees, and regulatory agencies using: • Oracle solutions• Microsoft solutions• Intergraph solutions• SAP solutions

Consumer Mobile Solutions• Delivery, implementation and support of mobile

broadband and GSM convergence technologies for mobile networks

Information Intelligence• Business intelligence• Dashboards and balance scorecards• Data mining• Data warehousing• Reporting

Infrastructure Services• Direct supply of products • Managed service• Cloud computing• Resourcing and contracting service

Financial services• Short-term insurance • Risk solutions• Asset management• Private equity• Forex• Personal income tax

Travel and event management • Travel management• Key account management • Event management

e-Commerce retail solutions • Swopping• Auctioning• Direct buying • Direct selling• Free classifieds

Exclusive concierge servicesA members-only concierge service providing: • Travel and flight management • Gift sourcing and delivery • Flower delivery • Personal shopper and special imports services• Business and networking services• Ticketing, leisure and entertainment• Transportation services

Property investment portfolio Focuses on high-potential property investments in focus areas including: • Retail parks• Commercial• Residential

B2B B2C

ICT Solutions Retail and Consumer ServicesContribution to revenue

41%

Number of staff

575

(non-reportable segment)

Number of staff

21


Living our values

Our value How we live it

Accountability We accept responsibility for our individual and team commitments. We are all held accountable – not only on what we deliver but on how urgently we do so.

Effective communication We are committed to purposeful, open and proactive communication. We take responsibility to listen, speak and write clearly in order to inform and foster collaboration.

Integrity We place fairness and honesty at the centre of all our policies, practices and operations. We uphold the highest ethical standards, demonstrating honesty and fairness in every action we take.

Excellence in everything we do We pursue excellence in everything we do. We are dedicated to be the best in quality, satisfying customers’ needs and honouring them.

Innovation We are highly creative and strive to connect new ideas with business realities. Ideas come from everywhere in the company including our customers and suppliers.

Passion and commitment We show pride, enthusiasm and dedication in everything we do. We are passionate about our people, our products and services.

Sustainability We will always strive to strike the appropriate balance between our environmental responsibilities, financial performance and social commitments.

Measuring core valuesNo baseline assessments or culture audits have been done in the last four to fi ve years. However, we measure some of the core values in our annual Performance Management and Key Results areas exercise. The recent introduction of Employee of the Month award rewards and highlights exceptional performance where employees demonstrate the core values through their actions and behaviour as well as the annual CEO Awards for companies which best demonstrate and live the core values.

Ourstrategy


Our strategy

Diversifi cation for sustainability Morvest is committed to continual growth and evolution to become a leading diversifi ed investment holding group. Since 2009, the Group has embarked on focused diversifi cation to improve our resilience and cement our sustainability while building a risk-attractive investment opportunity with steady returns from different markets.

While historically we operated in the B2B market with an exclusive focus on IT, and then expanded wider into professional services, ICT and outsourcing, the Group last year further diversifi ed to include the B2C markets of retail and consumer services including property investment. Continued expansion is intended to strategically position the Group to take advantage of signifi cant growth opportunities in emerging markets.

EXCO and the board set the Group’s strategic direction and targets.

Morvest defi nes short term as 12 months, medium term as 2 to 3 years, and long term as 5 years.

Key strategic objectives

Objective 2013 progress Strategic focus 2014

1

Diversification to an investment holding group

• Expanded retail and consumer services

• Moved from B2B focus to B2C• Established: – Travel and event management – Exclusive concierge services – Facilities management

• Ongoing focus and expansion including energy solutions

• Continue diversification

2

International expansion

• Explored USA market opportunities• Acquired Indian subsidiaries and

exploring market opportunities

• Offices to open in UAE• Further expansion in West Africa• Further expansion in India

3

Growing property portfolio to strengthen balance sheet

• Established property portfolio in South Africa, Middle East and USA

• Morvest campus investment (South Africa) totals approximately R85 million

• Continued focus on high-potential standalone property investments – locally and internationally

• Transition from leasing to ownership

4

Group optimisation

• Centralisation• Shared services• Continued building skills pool• Training and development (see pages

45 and 46)• Resourcing for adequate capacity

and skills • Consolidated family brand• Automation in manufacturing business

• Ongoing focus on 2013 progress areas of shared services

• Focus on enhanced investor engagement on strategy and developments

• IT governance and security • Continued pro-active approach to

reputation management

5

Sustaining BBBEE platform

• BEE transaction initiated during the year in terms of which key management and staff become invested in the company increasing black management ownership to 52%

• Finalise and implement BEE transaction for long-term sustainability

• Maintain and improve on all aspects of BEE scorecard

• Achieve Level 2

Short term Medium term


In diversifying and expanding, we retain the Group’s business ethos:• ensuring Morvest retains top of mind association with premium brands in our niche areas of operation;• establishing all underlying businesses as leaders in their respective markets;• encouraging and rewarding entrepreneurship to drive revenue and business opportunities outside our current scope;

and• incubating SMME development (within the Group) for a stronger Group and national economy.

Our acquisition criteria are strict and include:• sustainable long-term business with a pipeline of at least 20 years;• annuity-based income stream;• distinct competitive advantages in area of operation;• opportunity to tap existing infrastructure for organic growth; and• depth of management in the acquisition.

2013 Acquisitions Area of operation

60% of Isolve through ITQ BS (in which Morvest is a 50,01% shareholder) effective 1 March 2013

Microsoft Gold Partner

60% of SQ LDB through ITQ BS (in which Morvest is a 50,01% shareholder) effective 1 March 2013

Resourcing and contracting

How we operateOur management teams are entrepreneurial with signifi cant experience and thorough industry knowledge. They are well supported by a strong and effi cient central corporate team which guides them in strategy, and is responsible for maximising existing business structures and helping the business units drive appropriate development opportunities. The centre is also focused on BEE strategies to ensure that Morvest continues to compete meaningfully and to generate sustainability through the entrenched commitment of key management and staff.


Material issues

At Morvest we defi ne material issues as those risks and opportunities that have a direct impact on the ability of the Group to create value in the short, medium and long-term.

This is achieved through a comprehensive materiality assessment process, beginning with discussion and analysis by the Audit and Risk Committee (which consists of independent directors) and the internal audit function, which review the Group’s risk matrix. Key risks and opportunities are derived therefrom. The Social and Ethics Committee’s assessment of the impact of Morvest’s activities, products and services within the environment, health and public sectors was then taken into account as well as feedback from stakeholders. Furthering this process the EXCO attended a workshop – facilitated by external consultant Envisage Investor Relations – to refi ne our integrated thinking model and inform our materiality assessment. In addition, an independent materiality assessment was undertaken by Grant Thornton (Jhb) Inc. which included interviews with key management and reviewing board and committee meeting minutes, and media coverage of the Group’s activities over the past year.

As a result of this process, fi ve material issues were identifi ed and are cross-referenced below to the key risks and strategic objectives pertaining to each.

External environment

Human resources

Transformation

Income, growth and return

Reputation management

Material issue Key risks flagged Causes of risksPotential impact on Morvest

Addressed by strategic objective

External environment

Pricing pressure – mostly in the Outsourcing business unit

• Major telco’s revisiting pricing models due to market competition, declining average revenue per user (“ARPUs”), and interconnect revenues

• Protracted payment terms for customers

• Profitability and revenue

• Scale – global expansion

1

3

4

Competition • B2B market saturation• Increased international

competition• Central global

procurement model

• Diminished revenue

• Margin pressure

1

2

4

5


Material issue Key risks flagged Causes of risksPotential impact on Morvest

Addressed by strategic objective

Human resources

Depth of operational management and succession planning

• Challenging resourcing• Skills development

– lengthy duration• Scarce skills• Dynamic industry – low

retention levels

• Inability to achieve strategic objectives, the success of which requires highly skilled and competent management teams

• Sustainability• Opportunity cost• Client relationship

management

4

5

Transformation

Loss of key contracts due to reduced BBBEE compliance

• Inadequate direct black management shareholding

• Changes to the Codes and steeper weightings for certain scorecard elements

• Inability to maintain and increase profitability

• Threat to sustainability

• Loss of revenue

5

Income, growth and return

Customer sector and geographic concentration

• Significant dependence on telcos and parastatals

• Inability to sustain and maintain value (dependent on retention of major contracts)

• Requirement for dramatic cost cutting initiatives to meet customers’ demands

• Loss of major customers could drastically impact the “going concern” of certain Group businesses

1

2

5

Reputation management

Investor lack of understanding of the Group’s services and focus

• Based on share price, not clear if rationale and success of diversification strategy is being effectively communicated

• Impact on trust and credibility

• Reduced capital investment and returns for shareholders (based on share price)

• Impact on diversification strategy

4

Risk grading: High risk Moderate risk Low risk


Stakeholder engagement

The Morvest board identifi es and reviews the Group’s stakeholders once a year as stakeholder interests are dynamic and require ongoing assessment. During the year EXCO further held a workshop, facilitated by an external consultant, to review the identifi ed stakeholder groups and the methods of engagement. Key stakeholders are considered to be those groups of persons who have an impact on the Group’s business strategy, while being materially impacted themselves thereby.

Morvest engages with stakeholders, as identifi ed, in terms of the Group’s Stakeholder Management policy which focuses on bi-lateral communication. All stakeholder activities involve regular interaction from the Group’s side with stakeholders, and feedback from stakeholders which is then reported to the board on a quarterly basis.

From the company’s perspective, engaging with stakeholders enhances Group operations by accurately informing our material issues and infl uencing our strategic objectives. For stakeholders, the dialogue is informative and educational, directing a positive impact on the Group. Feedback from stakeholders is discussed at EXCO level. Where EXCO deems it appropriate, this is then discussed at board level and considered in strategy. Other than issues documented below, no further topics were raised during the year.

Stakeholder group What matters to them Nature of engagement Responsibility

Shareholders/investors

• Sustainability• Profitability • Return on Investment (share price

and dividends)• Cash generation• Corporate governance and

compliance• Risk management• Growth prospects

• Company announcements published on SENS and posted on Group website

• Financial results announcements posted to shareholders

• CEO and CFO engage with financial media where appropriate

• Ongoing communication with institutional shareholders and investment analysts:

– 1:1 interactions – SENS – press announcements – investor presentations at

conferences

• CEO• CFO• Company

Secretary

Lenders/providers of capital (global and local)

• Profitability • Capital management• Sustainability• Cash generation• Risk management• Growth prospects• Scale

• Contractually required information flow

• Regular ad hoc meetings

• CEO • CFO• CLO

Employees • Job security• Sustainability• Personal growth and development• Skills development• Remuneration and incentives

• Bi-annual performance management process, formal development plan

• HR policies• Regular site visits• Regular internal communication and

interaction• Workplace forums• Employee wellbeing programme

• HR Director• HR Managers

at subsidiaries


Stakeholder group What matters to them Nature of engagement Responsibility

National Government, provincial Government and municipalities

• Quality assurance compliance• Skills development • Job creation • Revenue through corporate taxation• BBBEE• PPPFA

• Active member and involvement in Progressive Business Forum

• Ongoing discussions with key policy makers

• EXCO• Board

Business partners (customers)

• Price • Project delivery• Quality• Service and product excellence• Value for money• Innovation• Environmental practices

(manufacturing)• BBBEE• PPPFA

• Regular 1:1 contact • Customer satisfaction reviews• Conferences and tradeshows

• Line managers• MDs/GMs• EXCO

Strategic suppliers • Project execution • Costs• Market conditions

• Regular 1:1 contact• Contracts and service agreements• Meetings• Workshops• Presentations • Training • Events

• Supply chain• MDs/GMs• EXCO

Before you are a leader, success is all about growing yourself.

When you become a leader, success is all about growing others.

Jack Welch

Leadership


Directorate

Executive Directors

5 6

87

Independent Non-Executive Directors

1

3 4

2


Dr Popo Simon Molefe 61 (Chairman)Appointed: 16 July 2004

Dr Molefe has made the successful transition from a high-

profi le senior career in politics into commerce. He previously

served two terms as Premier of the North West province.

For the past 11 years he has facilitated the development

of businesses in the North West province and founded

Lereko Investment Holdings. Dr Molefe has served as

Chairman of Armscor and PetroSA, and chancellor of North

West University. He is Non-Executive Chairman of Protea

Technologies, a principal of Lereko Metier Capital Growth

Fund and Executive Chairman of Lereko Investment Holdings.

Ahmed Mohammadali-Haji 32CA(SA), RA(SA) Appointed: 15 June 2011

Ahmed is the Subject Head: Financial Accounting and senior

lecturer in advanced fi nancial accounting at the University

of Johannesburg. He holds a number of professional and

directorate positions on professional boards. Ahmed is

also a regular presenter of various Continuing Professional

Development Programmes.

Prof Benjamin Marx 48CA(SA)Appointed: 8 February 2011

Prof Marx holds a number of national and international

memberships which include the Independent Regulatory Board

for Auditors (“IRBA”) and the Association of Black Chartered

Accountants of South Africa (“ABASA”). He holds positions on

various listed and non-listed boards. He is a founding member of

the Corporate Governance Research Group, which researches

and consults on corporate governance in South Africa. Prof

Marx is also an accomplished author on areas such as auditing,

corporate governance and audit committees. He currently serves

as Chairman of the Group’s Audit and Risk Committee.

Ntombizodwa Yvonne Mhinga 49Local Government Management and Administration, Adult Education, Business Management (University of South Africa) Appointed: 30 November 2006

Dubbed the “Princess of Africa” for her musical talent, Yvonne

has also successfully transitioned into commerce. She has

specifi c expertise in BEE initiatives. Yvonne further acts as

a brand ambassador for several global concerns and large

corporates as well as being a UNICEF goodwill ambassador.

She is the fi rst black African female to have won the Crystal

Award at the World Economic Forum, 2012.

1 2

3 4

Mohammed Varachia 44 (CEO)BCompt (Honours), CA(SA)Appointed: 15 December 2005

Mohammed has over 23 years’ experience in senior leadership

positions in the banking, fi nancial and telecommunications

sectors, amongst others. This includes experience in

corporate advisory for large multi-nationals. In addition to

co-founding Motoma ICT Group and MICT, Mohammed also

established a number of other companies primarily in the

ICT sector. He joined Morvest as CEO in 2005 following the

acquisition by the Group of MICT.

Alex Evan 48 (CLO)BA LLB Appointed: 15 June 2011

Alex has in-depth practical experience in telecommunications

regulation and legislation, having been closely involved with

the evolution of critical aspects such as interconnection, the

creation of a second network operator and underserviced area

licences. Alex joined the Group in December 2005 to advise

on regulatory and legal matters and heads Group Legal,

Compliance and Risk Management.

Surendranath (Suren) Singh 54 (CFO)MBA, MITM, CIS, ABPAppointed: 15 December 2005

Suren has over 25 years’ experience in leadership positions

at several large companies, especially within the ICT and

fi nancial services sectors. Suren has held the positions of

Group Financial Manager, Group Financial Director and Group

Executive Director: Investments and Business Development.

He joined Morvest in 2005 as CFO following the acquisition by

the Group of MICT.

Madoda Papiyana 39 (HR Director)NDHM, BTech, BSP (Cambridge)

Appointed: 15 December 2005

Madoda has 17 years’ experience in the fi eld of human

resources and industrial relations. He previously held positions

of Group HR Manager and General Manager of Resourcing

and Labour broking. Madoda joined Morvest in 2005 as Group

HR Director following the acquisition by the Group of MICT.

5

7 8

6


Dr Popo Molefe

Chairman

Chairman’s report

Morvest’s results for the year refl ect the benefi ts of our strategy of diversifi cation for growth. Revenue, EBITDA and HEPS all showed credible increases despite the continued challenges in the macro environment.

Our key focus during the year was on bringing meaningful, effective and sustainable changes to our BBBEE platform to entrench our positioning in the South African market. We also concentrated on further expanding our retail and consumer services and general footprint in line with our strategy to become a leading diversifi ed investment holding group, proudly South African and proudly worldclass. (See our CEO’s review for detail.)

Our business environment The macro landscape remained challenging as anticipated. We enjoyed very little easing of the tough conditions, which, while not surprising was nonetheless diffi cult. Political instability in some of the countries in which we do business added a further obstacle.

However, we effectively stared down certain of our major risks, with our diversifi cation strategy helping to address our over-reliance on key major customers as well as competition and concentration risk. I am proud of the strategies the team devised and am confi dent that we will continue to overcome new challenges with the same innovation and fortitude.

Our leap forward in BBBEE Our BEE transaction initiated in the year was a direct response to the demands of our major customers for appropriately rated BEE suppliers.

As background: changes to the Codes and steeper weightings for certain areas of scorecard development resulted in our rating dropping to Level 3 in August 2013. This posed a signifi cant threat to the sustainability of our business in the long-term, for instance the specifi c risk of losing sizeable contracts which would potentially reduce annual revenue by up to 61%.

Our aim of improving our BEE rating to Level 1 will be substantially addressed through successful implementation of the proposed BEE transaction. Our current BEE operational management shareholding is 32%, of which 3% is held by staff and 29% by management and directors (directly and indirectly). The proposed transaction is set to increase this shareholding to at least 52% and secure Morvest’s competitive advantage in both the private and public sectors.

It will further address the impact of legislative requirements, including the PPPFA, which recognises BEE ownership only in terms of management, employees and staff who are shareholders and actively involved in the business of the company.


What we mean by sustainability We remain committed to the Group’s long-term survival and

to this end implemented a number of initiatives during the

year such as the BEE transaction (as above) and ongoing

diversifi cation for growth. The latter strategy, which kicked off

in 2012, is aimed at reducing our reliance on the South African

market in general and in specifi c, the heavily saturated B2B

market in which Morvest has traditionally operated. The year

saw good growth in our B2C offering to continue exposing

the Group to new opportunities for revenue generation.

Corporate governanceWe place great emphasis on corporate governance and

have a number of structures, processes and policies in

place to ensure compliance with best practice. In doing

so we, as a board and all staff, are guided by our Code of

Ethics. See page 29.

Where we must focus in FY2014 I am confi dent that Morvest has cemented a solid platform

for long-term growth. Nonetheless the next 12 months are

expected to remain tough.

Continued execution of the Group’s diversifi cation strategy

is a focus in the year ahead. Specifi cally we will continue

developing our retail and consumer services and property

investment businesses.

Further geographic expansion is another key strategic objective, in order to offset diffi cult trading conditions in South Africa by capitalising on growth opportunities in emerging markets, primarily in outsourcing, ICT, resourcing, training and education.

BEE remains a further priority with the planned fi nalisation of the BEE transaction and the entrenchment of the new BEE policies.

My thanksOur CEO Mohammed has once again guided us through a challenging year, proving his strength of leadership and the value of the determined and passionate Morvest family who support him. Thanks as always to my fellow directors for their active contribution to strategic planning. In particular I wish to thank the Independent Directors who act in the best interests of the company and bring their considerable experience to deliberations. Finally thank you to our loyal stakeholders for your continued support in the face of ongoing change.

Dr Popo MolefeChairman

27 August 2013

Our key focus during the year was on bringing meaningful, effective and sustainable changes to our BBBEE platform


CEO’s review

The year saw Morvest established as a well-diversifi ed group defi ned by entrepreneurialism and good corporate citizenship. I am proud that we continued to effect our diversifi cation strategy without losing sight of our traditional Morvest values and business ethos. This realised signifi cant benefi ts for the Group, as refl ected in our expanding services and product offering, taking us closer to our goal of being a leading diversifi ed investment holding group, and our constantly improving results. In doing so we have shifted from being a B2B focused group to also serving B2C. This will ensure a diversifi ed income stream with further annuity business.

We also took decisive steps to address the risk of losing key contracts given a decline in our BEE status. The proposed BEE transaction will ensure that Morvest remains a meaningful empowerment driver in South Africa and retains its competitive edge. (See our Chairman’s report for further

detail.)

Operationally we focused on cutting overheads while retaining quality in order to counter trading challenges that included ongoing pricing pressure from a cost-sensitive customer base. We also continued to bed down the Retail and Consumer Services division, which is key to maintaining our growth curve.

A real high point was moving into our new everyone-under-one roof campus at the end of the year. The centralised campus reduces previous rental costs, eliminates

duplication in shared services and effectively promotes the

Morvest culture across the Group.

Diversifi cation for growth The Retail and Consumer Services segment expanded

its services offering, which fi rmly moves the Group from

a predominantly B2B provider into the B2C space. This

reduces the risks associated with over-reliance on key major

customers, competition and concentration, and challenges

specifi c to the B2B market such as pricing pressure.

The ongoing development of our property portfolio is

successfully strengthening our balance sheet. We have

taken a decision to move away from a rental model to

becoming property owners as evidenced in the move to

our new offi ce. In addition, we are seeking properties for

investment purposes.

Our geographic expansion also advanced during the year,

and offi ces are soon to open in the UAE. We see Africa as

a great region for future growth and opportunities and will

be expanding in particular in West Africa in the year ahead.

Financial overview Revenue increased 10,1% to R956,1 million from

R868,6 million in the prior year. 96% of revenue was

generated in South Africa.

EBITDA amounted to R141,5 million (2012: R112,1 million)

refl ecting a good EBITDA margin of 14,8%.

Mohammed Varachia

CEO


Acquisitions On 1 March 2013 our 50,01%-owned subsidiary, ITQ BS, acquired 60% of iSolve and SQLDB, effectively assuming control.

The companies’ core business is the provision of solutions and services for business intelligence, enterprise and custom development, data management, hardware and licensing and learning. The acquisition was in line with our growth strategy.

Sustainability As commented on in our Chairman’s report, our commitment to maintaining our standing as an admirable corporate citizen is ongoing, across all levels from internal ethics policies to upliftment initiatives that make a measurable difference to communities.

It is also a source of pride as I watch our Morvest family continue to benefi t from our learnership and internship strategies to develop a deeper skills pool and maintain the company’s health.

Our challenges ahead and outlook Telco’s continues to exert margin squeeze as a result of pricing pressure, and our cost containment while retaining quality of services is a key priority for the current year. Maintaining existing margins in the face of this challenge will not be easy, but we are confi dent it is achievable given our recognition of the risk and policy in place to deal with it.

In addition we will continue to address risks to our people and therefore our sustainability, by nurturing and growing our Leadership Programme to both retain our corporate leaders and identify suitable candidates for early training for succession planning purposes. Training expenditure is part of a key performance indicator for each of our managing directors as well as EXCO.

If the past year has shown but one thing, it is that Morvest is capable of assuming new challenges and achieving growth with enthusiasm, business acumen and integrity. We look forward to bringing the same spirit to FY2014.

Mohammed VarachiaCEO

27 August 2013

BBBEE transactionSubsequent to year-end and the date of this report the company received shareholder approval to implement the proposed BBBEE transaction to increase black executive management shareholding. The transaction is referred to as ‘the proposed transaction’ throughout this report and can be taken to be approved.

The Retail and Consumer Services segment expanded its services

offering, which firmly moves the Group from a predominantly B2B provider

into the B2C space.


CFO’s report

OverviewThis report is intended to provide additional insight into

the fi nancial performance of Morvest for the year under

review. The report needs to be read in conjunction with

the consolidated annual fi nancial statements presented on

pages 56 to 124 and the Chairman and the CEO’s report

(pages 22 and 24).

Financial results Satisfactory performance was achieved from the domestic

operations across the Group with organic growth resulting

in turnover up by 10,1% to R956,1 million. Business Support

Services segment contributed 59% with the ICT Solutions

segment contributing the balance. 96% of the revenue was

generated locally and the balance from Africa, a sector

Suren Singh

CFO

Morvest’s performance for the

year clearly reflects the resilience and inherent strength of its underlying businesses.

which is growing in the 5 to 10% range, and presents good

growth opportunity in West Africa in 2014.

Turnover historyR’000

0

200 000

400 000

600 000

800 000

1 000 000

20132012201120102009

757

580

697

005

807

300

868

576

956

164

During the year and subsequent to the year-end after

shareholders approved the proposed BBBEE transaction,

the Group renewed some of its major contracts, all

contributing to maintaining our three to fi ve- year pipeline.

Going forward revenue is likely to remain under pressure

due to continued pricing pressure and tough market

conditions expected to persist for the next 12 to 18

months.


EBITDAEBITDA margins have increased year on year to 14,8%, amounting to R141,5 million inspite of pricing pressure from the Telco’s customer base as well as competition from local and international markets. The Group was able to post an increase in EBITDA of 26% from the prior year due to careful cost management resulting in reduced costs as well as better utilisation through its investment of R39,9 million in newer technology in order to drive input costs down and further realising the benefi ts throughout the Group. The Group has achieved a compounded average growth rate of 16% over four years.

EBITDAR’000

0

30 000

60 000

90 000

120 000

150 000

20132012201120102009

129

198

141

520

112

082

104

782

77 3

19

Headline earnings and HEPSHeadline earnings growth of 12,5% amounted to R40,0 million (2012: R35,6 million) translating into HEPS of 8,20 cents (2012: 6,81 cents), representing a 20% increase.

Headline earningsR’000

0

12 000

24 000

36 000

48 000

60 000

20132012201120102009

57 7

84

27 3

51

35 5

97

32 3

34

40 0

32

Net asset value per share and net tangible asset value per shareThe net tangible asset value per share increased to 12,80 cents from 1,47 cents in the prior year. This was primarily as a results of the additions in property, plant and equipment (“PPE”) of R115,1 million, of which property under construction at balance sheet date was

R84,9 million, investment in newer technology amounted to R39,9 million and the impairment of the carrying value of the goodwill totalled R33,5 million.

Goodwill and impairment, amortisation and depreciationThe goodwill impairment review for the year was performed by management and reviewed by PKF (PTA) Inc. in terms of IFRS 36. The implied fair value of goodwill was less than the carrying value of R178,1 million, resulting in the impairment for the current year of R33,5 million (2012: R20,1 million) from the Business Support Services and ICT Solutions segments of the Group. The valuation outlook has become more conservative hence the write down of the goodwill. However the underlying assets have not changed with the exception of the sale of BIG (carrying value of goodwill had to be impaired by R18,7 million) and the impairment is a non-cash item and has no impact on headline earnings, with the exception of the sale of BIG that had a headline earning impact of R4,7 million.

The statement of comprehensive income was charged with a depreciation expense of R14,6 million (2012: R15,2 million). This is largely driven by capital expenditure of R115,1 million for depreciating assets, plant and machinery, computer equipment and improvement to leasehold amounting to R51,9 million. The balance of the capital expenditure amounting to R63,1 million was for the construction cost for the Group’s new Campus that was ready for use on 29 July 2013. The cost subsequent to year-end to complete the construction is estimated at R2,9 million.

For the year under review the Group had amortised intangible assets of R39,3 million mainly arising from customer contracts from the acquisition of its Mobile Data specialist company R and S Consulting.

Interest and other fi nancial income and fi nance costsGroup treasury received investment income of R3,1 million (2012: R2,9 million), comprising interest from banks, and incurred a fi nance cost of R11,2 million (2012: R15,8 million) mainly in respect of debt raised with Investec, Standard Bank and Nedbank to service the construction of the campus and investment in newer technology.

Financial structure and fundingThe annual fi nancial statements fully represent all the Group’s debt obligations of R135,6 million (2012: R113,7 million). This includes the vendor obligation for the R and S Consulting transaction of R18,0 million, which is due and payable based on achievement of the profi t warranty in 2014. At balance sheet date, the Group had drawn down R14,7 million of the R50,0 million approved with Investec for the Midrand Campus.

Morvest’s net debt position at balance sheet date was R52,5 million (2012: R9,9 million). The Group will incur a


CFO’s report (continued)

further R35,0 million of interest-bearing debt post-balance sheet for the development of the new Campus in Midrand, to be drawn down in the current year.

TaxationThe taxation paid for the year amounted to R33,1 million (2012: R38,8 million). The tax charge to the income statement amounted to R29,6 million (2012: R23,3 million) and translates to an effective tax rate for the year of 55,65%, normalised 31,6% after adjusting for non-deductible expenses which is mainly due to temporary differences arising from impairment of the goodwill of R33,5 million.

Cash fl owThe Group’s cash on hand at year-end was R83,1 million after settling R10,0 million of vendor obligations for R and S Consulting and funding R48,4 million of the Midrand Campus with internal cash (2012: R103,7 million after settling R17,0 million of vendor obligation). Net cash generated from operating activities amounted to R99,3 million (2012: R87,4 million). There is a continuous focus on improving the working capital cycle and managing any potential credit risk on an ongoing basis, trade receivables days was stable at the 50- day level, the impairment for trade receivable is calculated on a specifi c basis.

During the year Morvest’s investing activities movement of R56,5 million was mainly made up of R82,6 million in PPE and proceeds on sale of BIG of R17,3 million.

The cash fl ow from fi nancing activities movement of R63,5 million resulted from the Group’s repurchase of shares for R8,9 million, settlement of R19,9 million of interest-bearing fi nancial liabilities and payment of a dividend of R5,1 million and R20,5 million in dividend to non-controlling shareholders and settlement of vendor obligation of R10,0 million.

Dividend On 27 August 2013 the board approved and resolved to declare and pay a gross dividend for the Group of one cent per share in respect of the year ended 31 May 2013. This

represents a dividend yield of 5%. The board foresees this dividend as being sustainable and it is the intention to grow this on a year on year basis. The total dividend payable will equate to R8,8 million based on 880 000 shares in issue and includes the BEE and treasury shares.

ConclusionLooking ahead the Group has established a solid platform for long-term growth; however we foresee a challenging 12 to 18 months period ahead due to diffi cult market conditions and continued pricing pressure from India and China. These times call for running a lean and mean operation, focusing on cash fl ow generation, strict working capital management as well as a continuation of maximising internal cost effi ciencies through our shared services centre such as fi nance, human resources, company secretarial and legal, procurement, IT and Internal Audit on a geographical basis. The expansion and diversifi cation further into Africa and internationally is a key strategic objective.

We will continue to focus on the share repurchase programme over the next year as well as enhancing and sustaining the BEE equity ownership. Post- balance sheet, based on the independent fairness option, on the successful implementation of the BEE transaction, Morvest shares are most likely to range between 36 cents to 40 cents per share.

I would like to thank all the fi nancial and administrative staff across the Group for their sterling efforts in the last year and, in particular, for all their hard work in delivering these fi nancial results and for the board and Company Secretary for this excellent integrated report.

Suren SinghCFO

27 August 2013


Ethical leadership

The board is committed to ensuring that the Group conducts its business with integrity towards all its stakeholders. To this end the directors are committed to the RAFT principles of King III – responsibility, accountability, fairness and transparency. Two Codes are in place to ensure this behaviour at board level and throughout the Group: Code of Conduct and Code of Ethics.

Morvest does not tolerate any illegal or unethical conduct on the part of directors, prescribed offi cers, employees or affi liates. All Executive and Non-Executive Directors and prescribed offi cers can report non-compliance allegations directly to the Chairman of the Audit and Risk Committee. Matters are investigated in an appropriate manner, and disciplinary action is taken where warranted.

There were no reported incidences of non-compliance to the Code of Ethics or Code of Conduct during the year.

With regard to the broader employee pool and reporting of non-compliance allegations, in line with King III a formal Whistleblowing Policy was introduced in the year to accord with the Group culture of transparency and openness. Any whistleblowers can report alleged contraventions of the Codes. Employees are encouraged to make use of the Morvest confi dential email: [email protected]. The Morvest Whistleblowing Policy is available on the intranet.

• Applies to executives and prescribed officers

• Outlines Morvest’s core values

• Further confirms the Group’s commitment to ethical conduct and guidelines for behaviour in this regard in dealing with all stakeholders

• Reviewed annually by Social and Ethics Committee

• Applies to directors, prescribed officers and employees

• Part of HR Policy

• Requires employees to conduct Morvest’s business honestly and ethically, creating and maintaining a reputation for honesty, fairness, respect, responsibility, trust and sound business judgement

• Specific topics covered include conflicts of interest, bribes, corruption, sensitive information, inside information and trading, reporting, business intelligence, and employment equity

• Reviewed annually by Social and Ethics Committee

EthicalLeadership

Code of Conduct

Code of Ethics

It is clear that good corporate governance makes good sense. The name of

the game for a company in the 21st Century will be conform while it performs.

Mervyn King (Chairman: King Report)

Governance


Corporate governance

Approach and statement of complianceMorvest recognises that governance principles and practices are dynamic and evolve, so our approach to governance embraces relevant local and international best practice through ongoing review and refi nement.

The board recognises that the key governance challenge lies in balancing fi nancial growth at Morvest with broader economic development and social and environmental interest for long-term sustainability.

The board ensures sound corporate governance across the Group by communicating to subsidiary boards, at board and business review meetings, the overarching objective of sustainability, including the integrated policies on corporate governance and ethics which result in responsible corporate citizenship. Policies relating to governance are driven by Morvest head offi ce.

The board is of the opinion that Morvest complies in all material respects with the principles contained in the King IIIReport and with the Companies Act. Any principles which have not been applied are explained in detail in the King III checklist on page 139.

The boardMorvest’s unitary board comprises eight directors, four of whom are Executive and four of whom are Independent Non-Executive including board Chairman Dr PS Molefe. The responsibilities of the Independent Non-Executive Chairman and the CEO, and the remaining Independent Non-Executive and Executive Directors, are strictly separated to ensure that no director can exercise unencumbered decision making. The Chairman provides independent board leadership and guidance and encourages suitable deliberation on all matters

Governance structure

requiring the board’s attention. He further ensures the board operates effi ciently and as a unit. The CEO and other Executive Directors are accountable for strategy implementation and making day-to-day operational decisions. Independent Non-Executive Directors are not involved in the daily operations of the company.

The Independent Non-Executive Directors are high merit individuals who objectively contribute a wide range of industry skills, knowledge and experience to the board’s decision making process. During the year the board performed an assessment of the independence of each Non-Executive Director and concluded that each Non-Executive Director is independent. The board is cognisant that Dr PS Molefe’s length of service will exceed nine years in the current year. The directors charter and judgement has been assessed and was not considered to be affected or impaired by the length of service. The board will continue to assess compliance with King III requirements on an ongoing basis.

At any time all Independent Non-Executive Directors have unrestricted access to management and to the Group’s external auditors. Further, all directors are entitled to seek independent professional advice on any matters pertaining to the Group as they decide is necessary, and at the Group’s expense.

The board meets quarterly with ad hoc special meetings convened as necessary. Details of directors’ attendance at board and board committee meetings during the year are set out on page 34.

The board is governed by a formal Board Charter which sets out its responsibilities and authority. The Charter has been previously updated in line with King III and is reviewed

Audit and RiskCommitteeEXCO Remuneration

Committee Social and Ethics

Committee

Board


annually. It regulates the parameters within which the board operates and ensures the application of the principles of good corporate governance. It further sets out the roles and responsibilities of the board and its directors in line with sustainability practices.

The Audit and Risk, Social and Ethics and Remuneration Committees assist the board in discharging its duties within their own regulated frameworks of written authority. The directors acknowledge that notwithstanding this delegation, ultimate accountability and responsibility for the performance and affairs of the company and the Group remain with the board.

Company SecretaryNoelene January has been Company Secretary since 1 May 2006. She has over 12 years’ experience in the company secretarial and corporate governance arenas and is a member of the Institute of Directors.

All directors have access to the Company Secretary, who provides guidance to the board as a whole and to individual directors with regard to how their responsibilities should be discharged. Her duties further include:• overseeing the induction of new directors and ongoing

training of directors;• assisting the Chairman and CEO in setting the annual

board plan and board agendas;• formulating governance and board-related issues; and• arranging specifi c training or seminars for directors and

senior management.

The Company Secretary is not a director of the company. In addition, the board conducted an annual evaluation and is satisfi ed that Noelene January maintains an arm’s length relationship with the board at all times and is suffi ciently

qualifi ed and skilled to act in accordance with, and update directors in terms of, the King III Report and other relevant local and international regulations and legislation.

Board committeesThe Board Charter provides for the formation of board committees to assist the board in performing certain specialised duties, subject to overall responsibility residing with the board. In keeping with the recommendations of the King III Report, board committees during the year comprised EXCO, Audit and Risk, Social and Ethics and Remuneration Committees.

All board committee chairmen attend annual general meetings to answer questions from shareholders pertaining to their respective committees.

Each of the committees conducted a self-evaluation exercise during the year and the respective Chairman submitted a report with his/her fi ndings to the board. The board is satisfi ed that all board committees have effectively discharged their responsibilities as contained in their respective charters for the year under review.

50% Independent Non-Executive Directors

50% Executive Directors


Corporate governance (continued)

Committees

Audit and Risk Committee

Social and Ethics Committee

EXCO

DirectorsNumber of meetings

Executive Directors MS Varachia (CEO) 4/4S Singh (CFO) 4/4M Papiyana (HR Director) 4/4A Evan (CLO) 4/4

Independent Non-Executive Directors Dr PS Molefe (Chairperson) 3/4Prof B Marx 4/4A Mohammadali-Haji 4/4NY Mhinga 3/4

The board

Members and meeting attendance

Members and meeting attendance

Prof B Marx* 3/3A Mohammadali-Haji 3/3NY Mhinga 2/3

* Chairman

Prof B Marx 1/1A Mohammadali-Haji 1/1NY Mhinga* 1/1Dr PS Molefe 1/1

* Chairman

NY Mhinga 1/1MS Varachia* 1/1M Papiyana (HR Director) 1/1A Evan (CLO) 1/1

* Chairman

MS Varachia*M Papiyana (HR Director)S Singh (CFO)A Evan (CLO)N January (Company Secretary) Divisional managing executives

* Chairman

Number of Independent Non-Executive Directors 1/4Self-evaluation completed

Number of Independent Non-Executive Directors 4/4

Self-evaluation completed

Self-evaluation completed

Number of Independent Non-Executive Directors 4/8

Number of Independent Non-Executive Directors 3/3Self-evaluation completed

The board is responsible and accountable for the performance and affairs of the Group and has full control over all the underlying companies in the Group. It aims to exercise sound judgement and leadership with integrity based on the King III RAFT principles (see Ethical leadership on page 29).

Responsibilities

Remuneration Committee


• Reviewing the interim and integrated annual report and annual fi nancial statements

• The internal control framework and procedures• Confi rming and reviewing the internal audit as well as

internal, fi nancial and operational controls• Reviewing risk management, standards of grievance,

reporting and compliance and the integrity of the integrated annual report

The committee makes recommendations to the board on executive remuneration packages and policies, as well as the Remuneration Policy for the Group as a whole.

See the full Remuneration report on page 38 and 121.

• Monitoring Morvest’s compliance with relevant social, ethical and legal requirements and best practice codes including the United National Global Compact principles, the Organisation for Economic Cooperation and Development recommendations regarding corruption, the Employment Equity Act and the Broad-Based Black Economic Empowerment Act

• Ensuring good corporate citizenship • Assessing and monitoring the impact of Morvest’s

activities, products and services within the environment, health and public sector

• Operational activities of the Group• Developing strategy and policy proposals for

consideration by the board• Implementing the board’s directives • Providing leadership to senior management and

employees• Developing the annual budget and business plans for

approval by the board

• Ensuring compliance with consumer protection laws• Ensuring the company’s standing in terms of the

International Labour Organisation Protocol on decent working conditions

• Monitoring the company’s contribution towards the educational development of its employees

• Initiating goals and reporting on safety, health and environment as well as responsible corporate citizenship, social responsibility, ethics, values and transformation

See the Our Impacts report on page 39.

Responsibilities

• Monitoring the outsourced internal audit and IT governance functions

• Approving the appointment of the auditors for non-audit services

See the full Audit and Risk Committee report on page 59.

• Developing, implementing and monitoring internal controls, risk management, ethics and authority level

• Assisting with the implementation of corporate governance compliance at Group and divisional/subsidiary levels (supported by the internal audit function and Group Risk Manager (the CLO)


Corporate governance (continued)

Board processes Share dealings and confl icts of interestDirectors are required to declare their shareholdings, additional directorships, potential confl icts of interest and any dealings in securities of the company to the CEO and the Company Secretary. Should a confl ict of interest arise in respect of a transaction involving a director, that director must recuse themselves from deliberations in respect of that transaction. Complete recusal from the boardroom is at the discretion of the Chairman. The director is required to resign if the confl ict of interest is ongoing.

All directors, management and prescribed offi cers with access to fi nancial information and any other price sensitive information are prohibited from dealing in the securities of the company during “closed periods” as defi ned by the JSE. This is governed by the company’s Share Dealing Policy, which is reviewed by the board annually and contains “clearance to deal” provisions. An appropriate alert is sent to all directors and affected staff when the company is entering a closed period.

Appointment and induction of new directorsNewly appointed directors are required to have their appointments confi rmed at the next annual general meeting. The new appointments process is conducted in a formal and transparent manner. In the absence of a separate committee, the board as a whole is responsible for the appointment of new directors and all board members are therefore consulted on, and contribute opinion to, new appointments. In making these, the board takes into account skills and experience, calibre, ability to contribute meaningfully and concerns such as diversity.

The formal internal induction programme is conducted by the Company Secretary, CFO and HR Director. This includes site visits, introductions to key management and copies of interim and annual fi nancial statements, as well as minutes of the last board meeting and where available, the upcoming board meeting agenda. The programme is comprehensive, covering all relevant aspects of company law, securities exchange regulations, the roles, responsibilities and liabilities of directors, basic techniques of fi nancial analysis and the importance of investor and media relations.

Succession planningSuccession planning is a priority and therefore an ongoing agenda item at board level. Morvest continually seeks to identify suitable candidates within the Group to train and mentor for succession to senior management and the board. To this end the Group offers mentorship and coaching programmes (in-house at the Morvest Academy and externally) and further, short courses in conjunction with the Wits Business School.

Retiring directorsIn terms of the MoI, one-third of the directors retire at each annual general meeting. Retiring directors may make

themselves available for re-election provided that they remain eligible as required by the MoI and the JSE Listings Requirements. Accordingly, PS Molefe, A Mohammadali-Haji and NY Mhinga will retire and, being eligible, will offer themselves for re-election at the upcoming annual general meeting.

Reviews and evaluationsThe Company Secretary conducts an annual evaluation of the board’s performance, mix of skills and the individual contributions of directors, its achievements in terms of corporate governance and the effectiveness of its sub-committees. During the year the directors also performed self-assessments, which were reported at subsequent board meetings.

The Remuneration Committee evaluates the performance of the CEO and other Executive Directors in terms of the annual remuneration assessment, while EXCO evaluates the performance of the Independent Non-Executive Directors.

All the assessments and recommendations are fed back to the Company Secretary for inclusion in a formal report to the board.

IT governanceThe Audit and Risk Committee has implemented an IT Governance Charter which has been integrated into the Group’s systems by the Group IT Manager. An external IT consultant has been appointed to oversee the implementation of an IT strategy on a continuous basis. Certain networks have been segregated to minimise risk.

Further, an IT steering committee, headed by the Group IT Manager, is tasked with reviewing ongoing business requirements within the areas of IT, software and technological and physical infrastructure as well as business continuity plans.

Legal compliance The Company Secretary and CLO, together with key management, compile an annual checklist to monitor the Group’s compliance with the JSE Listings Requirements, the Companies Act and other applicable legislation. Subsidiaries report all compliance issues to the Company Secretary who together with the CLO reports to the board in this regard.

No fi nes or non-monetary sanctions have been imposed on the Group for non-compliance with any laws or regulations. The Group has also not been party to any legal actions for anti-competitive behaviour or anti-trust and monopoly practices during the year.

Application of King III The company complies in all material respects with the application of King III. The full King III application is outlined on page 139.


Risk report

Risk managementThe board regards effective risk management as a core driver of the Group’s sustainability. The directors are responsible for the Group’s risk management and system of internal control in conjunction with the internal audit department and Audit and Risk Committee.

The board sets risk tolerance levels based on a materiality assessment of the risk register.

The CLO is also the Group Risk Offi cer. In line with Morvest’s Risk Management Policy each business unit reports quarterly on potential risks, in the form of an updated risk register, having taken into account stakeholder feedback. Key risks are highlighted in Material issues on pages 14 and 15. High-impact risks are actively managed by management and reported to the CLO and EXCO who in turn report to the Audit and Risk Committee. (Risk is a standing item at all Audit and Risk Committee and EXCO meetings.) In addition, all new opportunities are systemically analysed for risk including: • screening/evaluating the risk; • appraising the risk; and• management/control of the risk.

Certain risks are transferred to third parties, eg insurance and limitation of liability clauses. Risks are mitigated by insurance cover and contracts are vetted to ensure that any potential exposure would fall under the umbrella of any policy. Property and business interruption policies are evaluated and taken out where appropriate. Morvest only uses reputable providers, insurance companies and underwriters.

Morvest’s systems of internal control are designed to:• provide reasonable assurance as to the integrity and

reliability of the fi nancial statements;• safeguard and maintain accountability of the Group’s

assets;• provide reasonable assurance regarding compliance

with statutory laws and regulations, and the maintenance of proper accounting records; and

• detect and minimise signifi cant fraud, potential liability, loss and material misstatement.

Human involvement immediately creates limitations on the effectiveness of any system of internal control. Therefore assurance cannot be guaranteed and the system is designed to manage rather than eliminate risk of failure and opportunity risk.

Internal auditInternal audit assesses the effectiveness of the Group’s system of internal control and risk management, using a risk-based methodology. It reports directly to the Audit and Risk Committee, which in turn reports to the board on progress on projects, problems encountered, issues demanding attention, feedback from operations and

project priorities. The committee annually reviews the independence of internal audit.

Areas of concern in internal control were identifi ed during the year as part of the annual assessment and have been discussed with management.

The internal audit function is governed by an Internal Audit Charter, which is reviewed on an annual basis. This outlines the role of internal audit which is to provide independent and objective assurance designed to help the Group accomplish its objectives through a systematic, disciplined approach to evaluating and improving risk management, control and the governance process. It follows the standards for the Professional Practice of Internal Audit established by the Institute of Internal Auditors (“IIA”).

The Group’s internal audit function also ensures that the internal audit resources are appropriate and suffi cient for the Group and that the team has the appropriate professional qualifi cations and skills to maintain the internal audit competence.

External auditorsThe external auditors are responsible for reporting on whether the fi nancial statements are fairly presented in compliance with IFRS and other applicable legislation and regulations. Their audit includes an assessment of internal controls. The directors are responsible for the preparation of the fi nancial statements.

The board, assisted by the Audit and Risk Committee, meets regularly with the external auditors and formally evaluates their independence on an annual basis. The board does not usually engage the external auditors for any non-audit services, including tax compliance and assisting with company secretarial duties. Where the external auditors, as an exception, are appointed for non-audit services, there is a strict separation of divisions in order to maintain independence and any such service requires Audit and Risk Committee approval.


Remuneration report

Remuneration CommitteeDuring the year under review the Remuneration Committee comprised Independent Non-Executive Directors NY Mhinga (Chairperson), Prof B Marx, A Mohammadali-Haji and Dr PS Molefe, meeting the Remuneration Committee Charter requirements that the committee comprise at least three Independent Non-Executive Directors.

The CEO and HR Director attended meetings by invitation and enjoyed ongoing unrestricted access to the Chairperson and committee members. They were excluded from any deliberations regarding their individual remuneration.

The structure of the committee demonstrates to all stakeholders that the remuneration of Executives is set by independent, objective peers who have no personal interest in the outcome and who will give due regard to the interests of all stakeholders; and to the fi nancial and commercial health of the Group.

One meeting was held in the year (but more frequent meetings are mandated if required). Details of directors’ attendance at the Remuneration Committee meetings are set out on page 34.

The committee is an independent and objective body which monitors and strengthens the credibility of the Group’s executive remuneration system, by linking executive remuneration to individual performance, the Group’s performance and market conditions. The committee makes recommendations to the board on executive remuneration packages and policies. To carry out its mandate, the committee is entitled to obtain any information from any employee and external legal and/or other independent professional advisor if necessary, at the expense of the Group.

Management executive’s performance is measured on a task-by-task basis which are aligned with Group targets. The six target areas are BEE, training and development, cash fl ow management, business sustainability, client satisfaction and client relation.

The committee is further responsible for devising a Remuneration Policy for the Group. The Remuneration Policy is tabled at the annual general meeting for a non-binding advisory vote by shareholders.

Current and proposed directors’ fees are set out below:

Approved fee for the year ended

31 May 2013

Proposed fee for the year ending

31 May 2014

Annual feeNon-Executive DirectorsChairman of the board R300 000 R318 000Board member R240 000 R254 400

Meeting feeNon-Executive DirectorsChairman of the board R3 250 R3 445Members of the board R1 250 R1 325Chairman of Audit and Risk Committee R2 500 R2 650Member of Audit and Risk Committee R1 250 R1 325Chairman of all other committees R1 250 R1 325Members of all other committees R1 000 R1 060

The committee’s responsibilities are updated annually to refl ect current legislation and recommendations, and it conducts an annual self-evaluation to ensure its effectiveness. It is also reviewed by the Company Secretary each year. The self-evaluation found the committee to be effective

Remuneration philosophyMorvest aims to be “an employer of choice”. To this end the Group adopts a Remuneration Policy which ensures a balance between the interests of staff and all other stakeholders. Basic salaries of employees are as far as possible market-related, while annual bonuses are aligned with Group performance.

Executive remuneration considers performance assessments against predetermined key deliverables, as well as Group performance.

Directors’ emoluments are set out in note 41 to the annual fi nancial statements. The next three most highly paid employees are set out below:

Employee2011/12

R 2012/13

R

Executive A 4 000 422 4 583 110Executive B 2 493 369 4 487 287Executive C 1 644 713 2 514 146

The Remuneration Committee implemented an annual review of the Group’s succession strategy. The review report was presented to the board who tasked management with implementing the strategy during the current year.

Yvonne Mhinga Chairman

27 August 2013

Ourimpacts


for the year-ended 31 May 2013

Value-added statement

2013R’000

2012R’000

Revenues 956 164 868 576 Less: cost of services (658 218) (608 759)

Value added 297 946 259 817

Indirect income 11 037 5 951

Total wealth created 308 983 265 768

Distributed as follows:

Employees contributionRemuneration and benefits 139 094 124 755

Donations and CSI spend 2 395 1 197

Providers of capital Dividend distribution 6 586 5 284 Providers of long term financeFinance costs 11 189 15 854

GovernmentTaxation paid 37 556 44 528

Retained to develop future growth 112 163 74 150

Value added 308 983 265 768

2012Value add

46,9%

27,9%

16,8%0,4%8%

Employees

Reinvestment

Government

Capital provider

CSI

2013Value add

Employees

Reinvestment

Government

Capital provider

CSI

45,0%

36,3%

12,2%5,7%

0,8%


Our people

The Group employs 1 590 (2012: 2 190) staff across the globe, of which 1 210 (2012: 1 061) are permanent and 380 (2012: 1 129) are contract workers.

Morvest believes that our employees are fundamental to the sustainability of the business. This means that creating an environment conducive to attracting, developing and retaining talent is a crucial focus for the Group. A compelling employment value proposition is therefore a key mitigator of human capital risk and accordingly a material issue for the Group (see Material issues on pages 14 and 15).

Morvest aims to offer:• competitive salaries;• an attractive work environment in which employees’

goals and aspirations can be fulfi lled;• incentive schemes rewarding employees for loyalty,

performance and innovation;

• benefi ts for all full-time employees including medical aid and pension and provident fund; and

• ongoing training and development through Morvest’s Training Academy and internship and learnership programmes.

Communication, transparency and access to information are critical to keep employees informed and foster the Morvest family spirit. In this light our new centralised campus has been of immediate benefi t, spurring the improvement of our existing culture of communication by enabling immediate access and integration of ideas. Our editorial committee remains responsible for the compilation of our monthly newsletter MorNEWS, as well as ad hoc electronic mailers to further ensure inclusivity.

Staff demographics*Total staff for the group by employment level – 2012 – 2013

Female Male

A C I WTotal

Female A C I WTotalMale

Grand total

% Black

% Female

Top management – 1 – – 1 1 – 2 1 4 5 80 20Senior management – 1 4 10 15 – 3 6 16 25 40 35 40Middle management 12 8 5 64 89 42 8 21 145 216 305 31 48Junior management 62 22 12 23 119 95 23 11 34 163 282 80 12Other 204 68 18 19 309 122 55 26 23 226 535 92 4

Grand total 278 100 39 116 533 260 89 66 219 634 1 167 71 29

Permanent employees only, excludes temporary staff.

Total excludes 43 foreign nationals (41 males and 2 females).A African C Coloured I Indian W White

Total staff for the group by employment level – 2011 – 2012

Female Male

A C I WTotal

Female A C I WTotalMale

Grand total

% Black

% Female

Top management – 1 1 – 2 1 1 2 2 6 8 75 25Senior management – 1 1 9 11 1 2 5 20 28 39 26 51Middle management 17 10 9 41 77 77 20 29 108 234 311 52 35Junior management 106 37 26 54 223 136 45 43 53 277 500 79 11Other 81 28 1 14 124 48 12 – 19 79 203 84 9

Grand total 204 77 38 118 437 263 80 79 202 624 1 061 70 30

Permanent employees only, excludes temporary staff.A African C Coloured I Indian W White


2013 2012

Our people (continued)

Male Female

%

0

10

20

30

40

50

60

African Coloured Indian White

Permanent employees by race

Permanent employeesby region

79,1%16,4%

2,2%

1,2%0,4%0,6%

0,1%

Western CapeEastern Cape

MpumalangaKZN Northern CapeGautengFree State

%

0

20

40

60

80

100

Wes

tern

Cap

e

No

rthe

rn C

ape

Mp

umal

ang

a

KZ

N

Gau

teng

Free

Sta

te

Eas

tern

Cap

e

Gender split by region

Male Female

Male Female

%

0

10

20

30

40

50

60

African Coloured Indian White

Permanent employees by race

Permanent employeesby region

KZN

Western CapeNigeria Limpopo

Mozambique

Mpumalanga

11,1%4,3%

0,4%0,4%

2,3% 78,2%0,1%1,8%0,2%1,1%

Eastern Cape Northern CapeGautengFree State

%

0

20

40

60

80

100

Wes

tern

Cap

e

No

rthe

rn C

ape

Mo

zam

biq

ue

Nig

eria

Mp

umal

ang

a

Lim

po

po

KZ

N

Gau

teng

Free

Sta

te

Eas

tern

Cap

e

Male Female

Gender split by region


2013 2012

0

30

60

90

120

150

Numberof staff

TerminationsEngagements

Staff engagements andterminations by gender

Male Female

Staff movement

Engagements Terminations

200

263

Permanent employees by gender

Male Female

45,68%

54,32%

0

40

80

120

160

200

TerminationsEngagements

Staff engagements andterminations by gender

Male Female

Numberof staff

Staff movement

Engagements Terminations

222

250

Permanent employees by gender

Male Female

41,19%

58,81%



Employment equityMorvest has a formal Employment Equity Policy in place for all employees and potential employment candidates, which takes cognisance of the diversity in broader South Africa and is based on equal dignity and respect for all. The overall aim is to identify the capacity of disadvantaged Groups in our underlying companies, advance skills levels through training and development, and ensure the representation and active involvement of previously disadvantaged individuals in all spheres of business. Ensuring training and advancing employment equity forms part of EXCO’s and management’s KPIs.

The Policy therefore promotes equal opportunities by encouraging good practices in the Group’s centralised recruitment process, in turn ensuring that we are compliant with the Employment Equity Act. Ongoing employment equity is monitored monthly to ensure that targets are met, and progress is communicated to staff via internal email, the intranet and specifi c workplace forums.

Morvest is opposed to tokenism, and a key employment equity objective is that suitably qualifi ed black individuals, women and people with disabilities have appropriate equal employment opportunities and are equitably represented in all occupational categories and levels in the workplace.

When recruiting new employees Morvest tries, wherever possible, to fi ll positions with appropriately qualifi ed candidates as above. Recruitment is enhanced through internship and learnership programmes where interns/learners are tutored on both theory and operational practice and are later integrated into the Group. (See Recruitment Policy below.)

In respect of promotions, existing employees are given preference wherever possible. Where no suitable internal candidates can be identifi ed, the position is sourced externally, subject to the same employment equity criteria.

However it is of great importance to the Group that the morale, productivity and confi dence of existing staff should not be adversely infl uenced by employment equity endeavours. Therefore nothing in the Policy establishes an absolute barrier to the prospective or continued employment or advancement of whites and males. Similarly, nothing in the Policy requires Morvest to retrench any existing employee solely to facilitate compliance with the Policy.

Each subsidiary is required to achieve its employment equity targets as determined and approved in the operation’s road map and/or budget.

No incidences of discrimination or violations of the Employment Equity Policy were reported during the year.

The Group’s Recruitment Policy aligns with our Employment Equity Policy, with key objectives to: • encourage good practice in the recruitment and selection

process;• gather together a body of good quality applicants from

whom to select and appoint suitable employees;• ensure that ability, objectivity and fairness is part of the

process;• ensure compliance with the Employment Equity Act;• align our recruitment strategy to our employment equity

numerical targets;• ensure that recruitment is carried out within budget

limitations; and• ensure that recruitment to any form of employment –

permanent, limited duration or temporary, third party contractors – and of any new or existing position takes place under an approved Staff Requisition Form (SRQ1) signed by all relevant signatories.

Performance managementMore than 90% of permanent employees (2012: 90%), receive regular performance and career development reviews. Performance is assessed according to specifi c key performance objectives at least once, or twice yearly (depending on the Policy of the relevant underlying company).

Disciplinary actionThe Disciplinary Policy is published on the intranet and in the Group’s internal Policy document. In terms of the Policy any employee action which impairs or endangers the relationship between an individual employee and the company, or any ignoring by an employee of Policy, procedures, regulations, or work instructions, will result in disciplinary action. The disciplinary procedure is corrective rather than punitive. When there is no response to correction by an employee, or it is found that there was a measure of wilfulness, punitive steps are taken.

While the disciplinary procedure aims to identify and correct non-conformance with the Policy, it also serves to provide a paper trail ensuring that corrective action is pursued in respect of each transgression/incident.

The disciplinary system applies to all employees of the company. Its key principles include: • A balance of management rights and employee duties.

When these duties are not carried out, discipline is both the prerogative and the inalienable right of management. Further, discipline is a management duty and senior employees must take disciplinary action against subordinates who commit a transgression or act in an unacceptable manner.

• The lawful, just and consistent application of discipline at all times. All relevant facts are thoroughly investigated before a decision is made.

• The responsibility of the immediate supervisor for the discipline of an employee.


• Respect as far as possible of employees’ privacy given that discipline is a personal and confi dential matter. This means involvement of the smallest possible number of people in disciplinary actions and prohibition of observers or persons not in the employ of the relevant company at disciplinary hearings.

• Formalised discipline when it becomes clear that a transgressor has not responded favourably to personal, verbal guidance or reprimand.

• The deliberate highlighting to a transgressor of his/her right to request a review of disciplinary action by a more senior manager, whose decision is then fi nal.

• Comprehensive and accurate record keeping of disciplinary actions.

During the year 24 (2012: 14) incidents were reported ranging from policy transgressions, misconduct and absenteeism to poor performance. There were eight dismissals (2012: four) with the balance resulting in written warnings.

Grievance Policy A formal Grievance Policy is in place at Morvest to enable employees to resolve real/perceived issues relating to the employment relationship and work, and so prevent a negative impact on productivity and commitment. Its main principles include: • Management’s acceptance that employees may from

time to time be dissatisfi ed with aspects related to the employment relationship.

• Management’s responsibility for addressing and settling all legitimate employee grievances in a fair manner.

• Timeous and appropriate resolution of grievances. • Guaranteed protection for employees who air grievances

against any form of discrimination, victimisation or prejudice.

• The fundamental right of a worker to use the help of a colleague or employee representative in raising a grievance.

• Pursuit of explained procedural steps for a mutually optimal resolution of the grievance.

• Employees’ right to pursue channels of resolution beyond Morvest when grievances cannot be resolved through the Group’s grievance procedure.

There were no reported grievances during the year.

Skills developmentThe key objectives for skills development and training at Morvest include:• role-based training plans to increase workforce

competence;• aligning employee performance with defi cits identifi ed in

skills gap analyses; and• improving overall business performance.

A personal development plan is devised for every employee, focusing on training needs and best practice implementation of training plans. The Group targets an

annual staff training spend of 2% of our total payroll, which in the year amounted to R1 653 469 (2012: R800 000) of which 89% was dedicated to previously disadvantaged individuals and 5% to SMMEs.

Our proprietary training academy, the Morvest Academy, ensures centralised management of most training interventions in the Group. This realises the benefi ts of cross-company training, scale and effi ciencies.

Training further includes learnerships and internships. The Group recruits learners and university graduates who are trained at the Academy and intern at the Group where possible, in an attempt to develop a skills pool for the Group and for the industry at large. During the year over 311 learners (2012: 287) were trained with courses including information management, plant engineering, IT training, Microsoft certifi cation and internal audit in terms of fi ve such programmes (see case studies on pages 48 to 50):• internal audit internships in the Professional Services

division (20 interns);• “Smart Plant” internships at Intergraph Systems (10

interns);• Microsoft application development internships at Mint

Net (6 interns);• iSolve Learnership Programme (12 learners); and• Premium Ideas with eDeaf (Institution of Deaf Learners)

Learnership Programme (3 deaf learners).

Further, induction sessions for new employees are held monthly at the Academy. Induction covers information on organisational structure, human resources processes and documentation, the Employee Wellness Programme, and Morvest culture including vision, mission and core values and the Code of Ethics. This programme plays a critical role in socialising new employees into the Morvest family and in shaping their performance, attitude and organisational commitment.

Leadership development Our focus on developing Group leaders is intended to help build a sustainable “Morvest culture” in which we live the goal of “exceptional service through exceptional people”. In addition to developing new skills on an ongoing basis, senior leaders Group-wide are identifi ed for succession planning purposes and are actively developed through specialised programmes and courses at the Academy and externally.

In line with this philosophy of appropriately equipping our leaders to lead, the Academy constantly trains newly appointed supervisors/foremen in supervisory skills to prepare them properly for their roles and responsibilities. They are taught proven managerial concepts, effective verbal and written communication skills, and the latest employee development techniques for effective domino development. Training is interactive and designed to address company-specifi c concerns.



Further, in early 2013 three junior managers were selected to attend the New Management Programme (“NMP”) at the Wits Business School which runs until September 2013. The key objectives of the NMP are to:• introduce managers to business principles and skills in

management areas;• give managers methods of coping with the pressures that

accompany advancement;• improve written communication;• help managers work more effectively in teams;• provide an understanding of how fi nancial information is

collected and used within an organisation; and• provide an overview of the basic principles of marketing,

particularly within the South African context.

The NMP aims to progress the participants from a specialist function role into general management and eventually into senior management roles. It focuses on introducing the participants to business principles and skills in management as well as enhancing skills in the analysis and evaluation of complex business information. The classroom experience is based on the Case Teaching Method and is supported by syndicate Group-based interaction work used to reinforce learning. This also ensures that participants benefi t from interaction with their peers who come from diverse business backgrounds.

The NMP has an NQF Level 6 rating and participants will receive a Certifi cate of Competence on successful completion of the programme.

Health, safety and wellnessThe Group is committed to a safe, healthy and hygienic working environment in compliance with the Occupational Health and Safety Act. The comprehensive SHEQ Policy in place covers all SHEQ requirements and sets out appropriate related procedures. It further provides guidelines on the prevention of accidents in the workplace, reporting of incidents, fi rst aid and fi re. No fatalities, incidents of occupational diseases or occupational injuries were reported during the year.

A trained SHEQ representative in each company is responsible for adherence to and development of the Policy in line with legislative and regulatory changes, and specifi c occurrences onsite. Employees are encouraged to familiarise themselves with the Policy as part of their initial induction and at annual performance assessment sessions. Employees understand the need to immediately report incidents to a supervisor trained to manage the consequences.

The Group’s SHEQ Policy and process include commitment to: • compliance with all relevant laws, regulations, standards

and any other possible requirements as a minimum standard;

• ensuring that all underlying companies have appropriate GRI, OHSAS 18001 and ISO 14001 accreditations;

• communicating openly to all persons working under the control of Morvest, such as employees, contractors, elected representatives and affected parties, to promote a system of enhanced occupational safety, health and environmental management;

• following a process of risk management that continually endeavours to reduce and/or prevent ill health and injuries arising from safety and environmental risks;

• developing remedial action and emergency response plans;

• providing the necessary resources, including training, in order to encourage greater responsibility for each employee;

• reducing and controlling all forms of potential pollution, in particular ground, water and air pollution;

• minimising waste and developing and encouraging opportunities for recycling, recovery and rehabilitation;

• promoting the effi cient use of water, raw materials, energy and natural resources;

• encouraging associate companies, suppliers, contractors and customers to adopt appropriate responsible SHEQ practices;

• liaising with employees, regulatory authorities and all other interested and affected parties on a regular basis in order to promote constructive interaction in matters of common concern; and

• monitoring and reviewing performance of the SHEQ programme through regular audits and assessments.

Employee wellness is a major component of Morvest’s SHEQ commitment. As a start the majority of permanent employees are provided with various health- and wellness-related benefi ts including:• medical aid;• trauma assurance; • lump sum disability; • disability income; • continuation options; • employee premium waivers;


• mortgage protector;• dynamic spend protector;• global education protector; and • funeral benefi ts.

We further recognise that our employees may require support in dealing with practical and emotional challenges outside of the Group, and all employees and their immediate families therefore have access, at the Group’s expense, to ICAS – confi dential 24/365 personal support and information services in areas such as:• stress;• fi nances;• legal matters;• relationships;• substance abuse;• family matters;• health issues including AIDS counselling; and• work challenges.

In addition to the telephone and face-to-face support, ICAS offers an innovative online health and wellness programme providing interactive resources on a wide range of topics. Morvest employees are encouraged to access and use their ICAS benefi ts.

HIV/AIDS is recognised at Morvest as an epidemic, and we are committed to creating a supportive and non-discriminatory working environment. Our formal HIV/AIDS Policy ensures the fair, ethical and equitable treatment of infected employees and demands confi dentiality of employees’ status. It is reviewed every six months to comply with the latest medical and legal guidelines.

Should an HIV-positive employee volunteer status information, the relevant managers are appropriately briefed and informed to enable them to manage the situation. Employees are encouraged to seek medical treatment, counselling, ongoing testing and assistance

from support Groups including ICAS. The Policy further prohibits any discrimination based on employee’s HIV/AIDS status, in particular when considering promotion of other career opportunities.

In addition to ICAS services, the Group provides regular training for employees regarding the disease and how to ensure a safe working environment. HIV/AIDS awareness days are conducted annually during November and December, which include the distribution of free condoms. Information is distributed via email, the intranet, posters and booklets. Morvest also participates annually in National AIDS Week Bannerthon as part of World Aids Day.

Labour relationshipsTwo Group subsidiaries in the Outsourcing division remain unionised:• Chemical Energy Paper Printing Wood and Allied Workers

Union (“CEPPWAWU”); and• National Union of Printing Publishing and Paper in

Nigeria.

Approximately 10% of Group employees (2012: 10%) are covered by collective bargaining agreements, of which 3% is in South Africa and the balance in Nigeria. The remaining Group-wide staff are covered by workplace forums.

No incidents of labour unrest were reported during the year.

Associations and professional memberships • Premium Ideas is a member of the Printing, Industry

Federation of South Africa (“PIFSA”). • Morvest Human Capital Management is a member of the

Association of Personnel Service Organisation (“APSO”). • Morvest is a member of the Progressive Business Forum

(“PBF”), the Institute of People Management (“IPM”), and the Institute of Directors SA (“IoDSA”).

• All Group directors and the Company Secretary are members of IoDSA.



Internship Programme Case Study

Intergraph Systems South Africa (“ISSA”)The second ISSA Smart Plant Internship Programme began in November 2012 and will run until 1 October 2013. The Programme is MICT SETA – approved and covers information management and plant engineering. One Asian male, fi ve black women and three black men were selected for the programme. The candidates are mostly information technology and chemical engineer graduates from Tshwane University of Technology, who as part of their studies are required to do practical learning in their respective industry.

The internship training is extensive and covers various solutions that enable the design, construction and operation of process and power plants. The training also provides information management capabilities required for this. Following completion of the theoretical training, the interns are given practical training and mentoring

by ISSA specialists. The programme is holistic and does not focus only on skills acquisition. The training methodology is designed to instil certain core values and work ethics such as discipline, commitment and responsibility, shaping the interns into mature and marketable employees.

As the programme moves to the last quarter, many of the interns will be deployed to Eskom where they will gain on-the-job experience. This work exposure will enhance their chances of being employed by Eskom on completion of the internship. This assists Morvest in its commitment to the MICT SETA to, where possible, place the interns in permanent positions once training is complete. Placements will also be done with either other ISSA customers or within ISSA based on project demands.

ISSA Attends Global Meeting in Las VegasIntergraph Systems South Africa (“ISSA”) recently attended the Intergraph Global User Meeting at the MGM Grand in Las Vegas. The annual meeting took place between 3 to 7 June and had an attendance of 3500 international delegates from various countries. Pat Thomson, Corrie Myburgh, Busiswe Mbelu and Ayanda Tshangola represented ISSA at the event. Busiswe and Ayanda were selected to attend after recently completing a one year internship at Intergraph and are now actively supporting Eskom with SPF Confi guration. Also in attendance were eight delegates from Eskom, of which six presented their use of Intergraph’s software to assist Eskom. These presenters included Louis Fermandez, a Senior Manager at Eskom specialising in Generation Plant Engineering and Mmabatho Gabonewe, a former intern at ISSA who was later recruited as a manager at Eskom. Her paper was entitled “Testing a completely integrated SmartPlant environment at Eskom”


Mint Management Technologies (“Mint”)Mint initiated a highly successful Graduate Internship

Programme in 2011, which continued during the year.

The programme offers a paid internship which helps

university graduates learn and secure the much needed

experience to launch their careers in the ICT work place,

while earning a basic income.

The third programme began in January 2013 and

will run until December 2013, with four IT graduates.

Applicants underwent a stringent selection process of

interviews and assessments. From hundreds of CVs, 24

applicants were shortlisted with six appointed and only

four remaining after the fi rst six months. All interns are

studying towards their Microsoft certifi cations with two

working towards SharePoint and two allocated to CRM.

The objectives of the programme are threefold:

• to provide a framework for students and graduates

from diverse academic backgrounds to enhance

their educational experience through practical work

assignments;

• to expose them to the work and main products of Mint

so they can train the next generations of software

professionals in South Africa; and

• to provide Mint offi ces with the assistance of

highly qualifi ed graduates specialised in various

professional fi elds.

Mint was the winner of the

Microsoft Social Responsibility

Partner of the Year

The programme is intensive and interns are required

to work fi ve days a week, while still studying for their

certifi cations, and within six months become client-

facing. At this point further selection takes place.

Interns are rotated across Mint’s technical departments,

carrying out their tasks under the supervision of a mentor.

They form an integral part of the teams, contributing to

the success of critical assignments while at the same

time gaining valuable hands-on practical experience.

Towards the end of programme, Mint reviews the

performance of the interns and, accordingly, extends

employment offers.

Programme successThe number of employment offers made after the

programme attest to the relevance and success of

the internship. In the fi rst year of the programme, Mint

intended to employ only one intern but the quality of their

work was of such a high standard that we employed all

six. In the second year a further three interns completed

the programme of which two were employed by Mint.

Mint is proud of the programme and continues to offer

a dynamic environment where interns are able to learn

and grow, becoming highly marketable and effective

employees in the ICT sector.

Social Responsibility Partner ofthe Year Winner



Top of the ISO 9001:2008 ClassSiyathokoza Ngcobo, an employee at Intergraph Systems South Africa, recently completed as ISO 9001:2008 Internal Audit training course, fi nishing as the top student of his class. Siya had previously completed ISO 9001:2008 Quality Management System course in order to be able to provide guidance on the implementation of quality management at Intergraph.

Foster-Melliar Trains First Deaf LearnerFoster-Melliar recently attained a significant achievement by successfully training a deaf learner on the ITIL Foundation Course. The course which ran from 27 May to 29 May introduces learners to the life cycle of managing IT services to deliver to business expectations.

Zamile Noxolo Dlamini became the fi rst deaf learner to be trained at Foster-Melliar and passed the course with a mark of 75%. Zamile is employed as an IT clerk at the South African Social Security Agency. Her application to participate the ITIL Foundation Course resulted in much planning and organising before the training could commence. The trainer, Graham Herbert, was

supported by two interpreters per day, who worked in tandem with Graham by taking turns to sign to Zamile.

The training method that was used is called “mainstreaming”, which refers to the practice of training the deaf learner in a class with non-deaf delegates. Graham reports that to ensure optimum learning for Zamile, he would check in regularly with her and the interpreters. The interpreters were not IT specialists, yet they had the challenging task of interpreting IT concepts and terminology. The fact that English is not Zamile’s mother tongue further attests to her exceptional feat. Morvest would like to congratulate Zamile and everyone who contributed to making the training a success.

Employee Case Study

Following the completion of his recent training, Siya has been nominated as the Quality Management System (“QMS”) Representative for Intergraph, whereby he will ensure that the principles of quality management are effectively applied to customer-orientated business activities. Under Siya’s guidance, Intergraph SA aims to improve on the service delivery to their customer base, and thereby further improve their position in the market place.


Transformation

Scorecard and policyTransformation was a key priority in the year, in light of which we laid the groundwork for the BEE transaction to be fi nalised in the year ahead. (See our Chairman’s report for details on the transaction.)

Morvest has set the target of regaining Level 2 in terms of the Codes by the end of the 2014 fi nancial year. We have set clear targets for each area of the scorecard, dovetailing with targets for each business unit. As in the past, progress in achieving these targets will be measured twice yearly so that trouble spots can be identifi ed and redressed to ensure constant advancement. The Social and Ethics Committee will be instrumental in this. Monthly monitoring of BEE targets at each business unit and a formal report thereon contribute to the progress assessment.

Our ultimate goal is to elevate to the optimal Level 1. Our formal policy documents codify processes and guiding principles to get us to this milestone, namely: a Procurement Policy, a Recruitment and Selection Policy; a Training and Development Policy, Skills Development Plans and a Social Responsibility Strategy.

BEE scorecard

BEE code

August 2012

Scorecard weighting achieved

August 2013

Scorecard weighting

achieved

Ownership 21 18,08Management control 10,48 9,29Employment equity 9,89 6,36Skills development 8,72 4,76Preferential procurement 18,17 20Enterprise development 15,00 15Socio-economic development 5 5

Black management controlIn the year under review, seven of Morvest’s nine board members were black and all subsidiaries have at least 50% (2012: 50%) black directors on their respective boards. 80% (2012: 75%) of top management, 35% (2012: 26%) of senior and 31% (2012: 52%) middle management in the Group were black. The proposed BEE transaction will ensure that management becomes more invested in the Group, and therefore more closely aligned with the interests and goals of all stakeholders. Further, this will ensure long-term sustainability for the Group as a whole.

To accelerate development of management skill, suitable candidates are identifi ed for development training and previously disadvantaged candidates are prioritised wherever viable (see Our People on pages 41 to 50 for further detail).

Employment equity and skills development See Our People on pages 41 to 50.

Preferential procurement A formal Morvest Preferential Procurement Policy refl ects the Group’s commitment to broadening our supplier base with empowered enterprises on a preferred basis. Centralised procurement vets all suppliers for their BEE status in order to achieve targets. 80% (2012: 95%) of total Group procurement spend was allocated to local South African-based suppliers for the year under review, of which 89% (2012: 17,9%) went to black empowered businesses and 5% (2012: 7,9%) to SMMEs.

Enterprise developmentMorvest recognises that it is in the best interests of the Group to empower SMMEs, which in turn funnel their competence and expertise back into Morvest. The Group therefore remains committed to encouraging black entrepreneurs to establish and expand sustainable and commercially viable SMMEs. Encouraging entrepreneurship accords with our internal culture where initiative is rewarded. In this light Morvest has created an incubator structure to nurture SMME development, which is vital to sustainable socio-economic growth in South Africa.

During the year Morvest invested R1,5 million in Eratis a 100% black owned company with 40% ownership by black women. Eratis develops and implements ICT solutions for Government departments, municipalities and public enterprise organisations. The funds were used to cover operational expenses. Morvest further provided shared services support including fi nance, human resources, legal, IT, company secretarial and legal services.

Social upliftmentAs a responsible corporate citizen Morvest has been providing technical and fi nancial support to South African communities for more than a decade.

The Group targets 1% of total NPAT per year for allocation to these initiatives. Accordingly, during the year more than R895 476 (2012: R1,2 million) was committed to our upliftment projects, exceeding the target. Our focus was grassroots organisations in the areas of community development, nutrition, early childhood development, education and food security. As an organisation that operates in the training and consulting fi eld, amongst others, education is a particular focus for our CSI programmes. These projects form the pillars of our contribution to a developing and hopeful society.

The Social and Ethics Committee regularly reviews CSI requests and benefi ciaries. All benefi ciary organisations must adhere to legal compliance and registration in terms of the Guide to the Non-Profi t Organisations Act 71, of 1997, in order to be considered. Further requirements of eligibility include the review by the committee of the constitution, demographic information, fi nancial statements and general management of the organisation in question.


eDEAFDuring the year PISA funded the training of three deaf students at the eDeaf Johannesburg Campus. The students are being trained in Adult Education and Training, an 18-month programme through the Media Works computer based programme in South African Sign Language. The programme has a practical/work place training component and is aimed at grade 8 to 10 school

Transformation (continued)

Annual charitable events in which Morvest participated: • Tekkie Tax Day, benefi ting animal welfare,

community welfare, caring for children, caring for people with disabilities, and education.

• National AIDS Bannerthon.

Certain Morvest companies also make smaller individual contributions to non-government and non-profi t organisations and schools during the year, either in terms of monetary assistance or employee volunteerism. Examples of such initiatives in the year included:• The Smile Foundation;• Johannesburg Children’s Home;• Strathyre Girls’ Home;• Kensington Ridge Primary School; and • Compass (a day crèche for disadvantaged children).

Through the various projects we implement Morvest aims to help create a better future that is sustainable for our benefi ciaries, and at the same time to enhance our own ability to promote and support the transformation goals of our country.

Ubunye Educare Centre School feeding and education scheme in the Western Cape which works with children in underprivileged communities to develop important social and learning skills before school-going age. It also supplies daily meals to the children who attend the centre, which is in most cases the only food the children get daily.

Morvest contribution: R410 000 (2012: R450 000) in the year under review, in fi xed monthly payments to cover rent, utilities, and salaries and ensure that the children were given the best opportunities. Benefi ciaries 200 children and six staff members.

The African Feeding Scheme – Vegetable Garden Project Project which aims to empower local women in disadvantaged communities with skills in subsistence farming. The participants in this Project are given seeds, equipment and fertiliser and taught how to grow crops (mainly cabbages, potato and carrots). Each woman is given her own vegetable bed/s and is responsible for planting, weeding, watering and reaping. By planting three or four different types of vegetables in rotation, enough food can be grown all year around to feed an entire family. Surplus vegetables are sold to the community to earn an extra income.

Morvest contribution

R50 000 (2012: Nil)

KidshavenRegistered shelter and children’s home for vulnerable children. Its mission is to provide care and nurturing in a secure environment. The children are given education, guidance, therapy, training and support.

Morvest contribution (fi fth year running)

R95 652 (2012: R79 380) Benefi ciariesSchool fees for nine children attending Willowmore High School and food.

Organisations supported during the year represent sustainable benefi ciaries exposed to a long-term commitment from the Group:

Morvest contribution R150 000

leavers. eDeaf boasts state of the art training facilities which offer the ideal learning environment for deaf people and their training courses are designed to empower deaf communities for the world of work.


Our environment

Morvest is committed to principles, as embodied in the SHEQ Policy, which ensure we are an environmentally responsible organisation. These include:• conducting business operations in a manner that

minimises adverse impacts on the social, biophysical, cultural and historical environment through management practices that foster the protection of the environment;

• complying with all relevant environmental legislation, regulations and other requirements to which the company may subscribe;

• preventing pollution; and• continually improving the overall environmental

performance of our activities, products and services.

Morvest’s formal Environmental Policy covers all Group companies and is in line with ISO 9001/2000. The Group maintains open communication channels with authorities, environmental organisations, the public and any others physically affected by Morvest’s operations. The Policy is communicated to subsidiary level through Morvest’s intranet and Group notice boards. EXCO annually evaluates application of the Policy and environmental procedures in the Group. Although the impact is not consider a material issue to the company management sets and monitors targets for compliance with the Policy.

Specifi c focus is on the Business Support Services division, especially in respect of outsourcing services such as packaging, fulfi lment and secure printing, where activities include assembly and manufacturing.

In line with our SHEQ Policy, our new centralised campus

operates to limit the extent of environmental impact

including on water (this through recycling). The building

has glass in shuttered confi guration in line with the

energy-effi ciency regulations of the South African National

Standard 10400 XA: 2011.

Waste management is monitored via a waste management

system and all waste is recycled. Reducing waste is one of

the general managers’ core deliverables.

No fines were received for non-compliance with

environmental laws and regulations in the year.

RecyclingFully recyclable paper is used across the Group as a

minimum standard. Further, 100% of the paper used for

our card manufacturing solutions is recycled base paper,

which amounts to approximately 170 tons per year (2012:

150 tons).

Morvest has developed the fi rst fully recyclable starter pack

in South Africa.

Energy and water usageMorvest is currently looking at systems to monitor energy

consumption. Reducing electricity and water usage are

a key deliverable for general managers and once the

monitoring system is in place the Group will be able to set

more defi ned targets and monitor progress.

Premium Ideas Case StudyIt has been a decade since Premium Ideas moved away

from PVC (polyvinyl chloride), shown to be harmful

to humans and the environment, and began using

PETG (polyethylene with glycol) which has no chloride

additives.

Over the last fi ve years Premium Ideas launched the

fi rst RPETG- (recycled PETG) based GSM packs to the

market. RPETG comprises 60% to 70% recycled PETG

material, which means a reduction in waste streams

that were previously fl ooded with about 340 tons of

virgin waste per annum, as 225 tons of PETG from the

streams can now be extracted and used for secondary purposes.

Premium Ideas has now also developed a complete RPET starter pack, a fi rst to market, which proves 100% recyclable as opposed to the RPETG, the glycol coating on which, rendered the packs only partially recyclable.

Morvest is aware that initiatives like this not only decrease damage to the environment, but also promote new industries by driving the demand for recycled waste, contributing to the South African economy and alleviating unemployment.


Independent assurance report on selected sustainability information to the directors of Morvest Business Group

To the directors of the GroupWe have undertaken a limited assurance engagement on selected sustainability information, as described below, as presented in the 2013 Integrated Report of Morvest Business Group inclusive of its subsidiaries (the Group) (inclusive of the supplemental GRI Content Index Table in the Appendix of the 2013 Integrated Annual Report) for the year ended 31 May 2013 (the Report). This engagement was conducted by Grant Thornton’s Sustainability and Integrated Reporting team that has three years of experience in sustainability reporting and assurance.

Subject matter and assurance objectivesThe subject matter of our engagement and related assurance we are required to provide is as follows: 1. limited assurance on the Report’s alignment with the

AA1000APS (2008) principles (inclusivity, materiality and responsiveness); and

2. limited assurance on the Group’s self-declaration of the Global Reporting Initiative (“GRI”) G3.1 Guidelines C+ application level.

Director’s responsibilitiesThe directors of the Group are responsible for the selection, preparation and presentation of the sustainability information, the identifi cation of stakeholders and stakeholder reporting requirements, the identifi cation of the Group’s material issues, for appropriately managing the Group’s commitments with respect to sustainability performance, establishing and maintaining appropriate performance management and internal control systems from which the reported information is derived, and for such internal control as the directors determine is necessary to enable the preparation of the Report that is free from material misstatement, whether due to fraud or error. The directors are also responsible for the selection and application of the criteria detailed below:• the AA1000APS (2008) regarding the Group’s alignment

with the AA1000APS (2008) for the three principles of inclusivity, materiality and responsiveness (the AA1000APS (2008) principles); and

• the GRI G3.1 Guidelines for the Group’s self-declaration of the C+ application level.

Inherent limitationsNon-fi nancial data is subject to more inherent limitations than fi nancial data, given both the nature and the methods used for determining, calculating, sampling or estimating such data. Qualitative interpretations of relevance, materiality and the accuracy of data are subject to individual assumptions and judgements. We have not conducted any work outside of the agreed scope and therefore restrict our conclusion to the assurance objectives set out above.

Our independence and quality controlWe have complied with the Code of Ethics for Professional Accountants issued by the International Ethics Standards

Board for Accountants, which includes independence and other requirements founded on fundamental principles of integrity, objectivity, professional competence and due care, confi dentiality and professional behaviour.

In accordance with International Standard on Quality Control 1, Grant Thornton maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Responsibility of the independent assurance provider Our responsibility is to express a limited assurance conclusion on the selected sustainability information based on the procedures we have performed and the evidence we have obtained. We conducted our limited assurance engagement in accordance with the International Standard on Assurance Engagements (“ISAE”) 3000, Assurance Engagements other than Audits or Reviews of Historical Financial Information, issued by the International Auditing and Assurance Standards Board. That Standard requires that we plan and perform our engagement to obtain limited assurance about whether the selected sustainability information is free from material misstatement.

Our procedures selected and the extent of our procedures, depend on our judgement including the risks of material misstatement of the selected sustainability information in the Report, whether due to fraud or error. In making our risk assessments, we considered the effectiveness of management’s internal controls relevant to the Group’s preparation of the Report when determining the nature and extent of our procedures; however, our assurance engagement was not designed to provide assurance on the Group’s internal controls.

In a limited assurance engagement, the evidence gathering procedures are less than where reasonable assurance is expressed. We believe the evidence we have obtained is suffi cient and appropriate to provide a basis for our limited assurance conclusion.

Summary of procedures performedThe procedures we performed were based on our professional judgement and included the following procedures:• Interviewing management and senior executives to: – obtain an understanding of the Group’s operations,

service offerings and the external environment in which it operates;

– obtain an understanding of the Group’s stakeholder engagement process;

– obtain an understanding of the Group’s risk assessment and risk monitoring processes; and

– obtain an understanding of the Group’s information gathering and reporting processes including those


used to develop the content of the Report (specifi cally the process that the Group has in place for identifying the material selected sustainability information to be included in the Report);

• Performing external and internal material issues scans in order to identify the signifi cant risks and opportunities currently facing the Group including:

– desktop reviews of press releases relating to the Group and the industries in which it operates during the current reporting period, and SENS announcements released by the Group during the current reporting period; and

– desktop reviews of board and committee packs for the current reporting period, including the Group’s risk register;

• Reviewing drafts of the Report, to ensure that the selected sustainability information contained within the Report:

– is reasonably aligned to the information gathered as a result of our procedures performed, and is fairly stated in all material respects;

– is aligned with the AA1000APS (2008) principles of inclusivity, materiality and responsiveness; and

– complies with the GRI G3.1 Guideline application level C+ (responses to all required indicators, as well as no fewer than 10 core indicators, with at least one from each of economic, environment and society).

Limited assurance conclusions1. On the AA1000APS (2008) principles of inclusiveness,

materiality and responsiveness on which we are required to express limited assurance. Based on the procedures we have performed, nothing has come to our attention that causes us to believe that the Report has not been prepared in alignment with the AA1000APS (2008) principles of inclusivity, materiality and responsiveness.

2. On the Group’s self-declaration on the GRI G3.1 C+ application level on which we are required to express limited assurance. Based on the procedures we have performed, nothing has come to our attention that causes us to believe that the Group’s self-declaration of a C+ application level is not fairly stated in all material respects, in accordance with the GRI G3.1 Guidelines.

Other mattersThe maintenance and integrity of the Group’s website is the responsibility of the Group’s management. Our procedures did not involve consideration of these matters and, accordingly we accept no responsibility for any changes to either the information in the Report or our independent assurance statement that may have occurred since the initial date of presentation on the Group’s website.

Restriction of liabilityOur work has been undertaken to enable us to express a limited assurance conclusion on the selected sustainability information to the directors of the Group in accordance with the terms of our engagement, and for no other purpose. We do not accept or assume liability to any party other than the Group, for our work, for this statement, or for the conclusion we have reached.

GRANT THORTON (JHB) INCDirector: Claire Jennings

18 October 2013

Grant Thornton Offi ce Park137 Daisy StreetSandownJohannesburg2196

Morvestannual fi nancial statementsDirectors’ Responsibilities and Approval 57

Declaration by Company Secretary 58

Audit and Risk Committee Report 59

Report of the Independent Auditors 60

Directors’ Report 61

Accounting Policies 64

Statement of Comprehensive Income 80

Statement of Financial Position 81

Statement of Changes in Equity 82

Statement of Cash Flows 84

Notes to the Financial Statements 85


Directors’ responsibilities and approval

The directors are responsible for the preparation, integrity and fair presentation of the fi nancial statements and other fi nancial information included in this report. In presenting the accompanying fi nancial statements, International Financial Reporting Standards, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, the JSE Listings Requirements and the Companies Act of South Africa have been followed; applicable accounting assumptions have been used while prudent judgements and estimates have been made.

The going-concern basis has been adopted in preparing the fi nancial statements. The directors have no reason to believe that the company or the Group will not be a going concern in the foreseeable future based on forecasts and available cash resources. The fi nancial statements support the viability of the company and the Group.

The fi nancial statements have been audited by independent accounting fi rm, PKF (Gauteng) Inc., which was given unrestricted access to all fi nancial records and related data, including all resolutions and minutes of all meetings of shareholders, the Board of directors, and committees of the Board. The directors believe that all representations made to the independent auditors during the audit were valid and appropriate.

The fi nancial statements were approved by the directors on 27 August 2013 and are signed on their behalf.

MS Varachia S SinghChief Executive Offi cer Chief Financial Offi cer

Johannesburg27 August 2013


Declaration by Company Secretary

In terms of section 88(2)(e) of the Companies Act of South Africa, I declare that to the best of my knowledge and belief, the company has lodged with the Registrar of Companies all such returns as are required of a public company in terms of the Companies Act of South Africa and that all such returns are true, correct and up to date.

Company SecretaryNoelene January

27 August 2013Johannesburg


Audit and Risk Committee report

In terms of section 94 of the Companies Act of South Africa (the Act), the Audit and Risk Committee (“Committee”) reports as follows on its responsibilities performed.

ObjectiveThe objective of the Committee is to perform its statutory responsibilities regarding the appointment and independence of the external auditor as per section 94 of the Act and to assist the Board in discharging its corporate governance duties and responsibilities relating to fi nancial reporting, auditing and the safeguarding of the company’s assets.

MembershipThe Audit and Risk Committee consists of directors who are in the opinion of the Board considered to be independent. The members of the committee are recommended by the Board and confi rmed by the shareholders at the annual general meeting.

FunctioningThe Audit and Risk Committee met four times during the year and has performed its functions and responsibilities as set out in the charter.

External auditThe Committee has satisfi ed itself that the auditor of Morvest Business Group Limited is independent, as defi ned by the Act.

There is a formal procedure that governs the process whereby the appointed audit fi rm is considered for non-audit services, and the engagement of the auditor for such work is reviewed and approved by the Committee. No complaints have been received by the Committee relating to accounting practices and internal audit of the company or to the content or auditing of the company’s fi nancial statements, or to any related matter.

The Committee has nominated for approval at the annual general meeting, PKF (Gauteng) Inc. as the external auditor for the 2014 reporting period. Manoj Manilal is assigned by the fi rm PKF (Gauteng) Inc. as the designated auditor for Morvest Business Group Limited.

Annual fi nancial statementsThe Committee has, based on the information provided to it by management and the external auditors, evaluated whether the fi nancial statements are a true and fair view, in all material respects, and has subsequently recommended the fi nancial statements for approval to the Board. The Board has subsequently approved the fi nancial statements which will be open for discussion at the forthcoming annual general meeting.

Finance function competencyAs required by the JSE Listing Requirements par 3.84(h), the Audit and Risk Committee has satisfi ed itself that the Group Chief Financial Offi cer, S Singh, has appropriate experience and expertise. In line with King III, the Committee has also satisfi ed itself as to the experience, expertise and resources of the fi nance function.

Professor Ben MarxChairman of the Audit and Risk Committee



Report of the independent auditors to the shareholders of Morvest Business Group Limited

Report on the fi nancial statementsWe have audited the fi nancial statements of Morvest Business Group Limited which comprise the consolidated and separate statements of fi nancial position as at 31 May 2013 and the consolidated and separate statements of comprehensive income, statements of changes in equity and statements of cash fl ows for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes, as set out on pages 64 to 124.

Directors’ responsibility for the consolidated fi nancial statementsThe company’s directors are responsible for the preparation and fair presentation of these fi nancial statements in accordance with International Financial Reporting Standards, and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of fi nancial statements that are free from material misstatements, whether due to fraud or error.

Auditors’ responsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by directors, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the fi nancial statements present fairly, in all material respects, the consolidated and separate fi nancial position of Morvest Business Group Limited as of 31 May 2013, and its consolidated and separate fi nancial performance and cash fl ows for the year then ended in accordance with International Financial Reporting Standards, and the requirements of the Companies Act of South Africa.

Other reports required by the Companies ActAs part of our audit of the consolidated and separate fi nancial statements for the year ended 31 May 2013, we have read the directors’ report, the Audit and Risk Committee’s report and the Company Secretary’s Certifi cate for the purpose of identifying whether there are material inconsistencies between these reports and the audited consolidated and separate fi nancial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identifi ed material inconsistencies between these reports and the audited consolidated and separate fi nancial statements. However, we have not audited these reports and, accordingly, do not express an opinion on these reports.

PKF (Gauteng) Inc.Registered AuditorsChartered Accountants (SA)Registration number: 2000/026635/21Director: Manoj M Manilal



Directors’ report

1. Nature of business Morvest Business Group is a main board listed company with an international footprint spanning Africa (South Africa,

Mozambique and Nigeria), India, UAE and the USA. The Group’s operations are aligned into three key divisions: Business Support Services (including Professional Services and Outsourcing Solutions), ICT Solutions and the Retail and Consumer Services. The Retail and Consumer Services division is part of the Group’s diversifi cation strategy and includes focus areas such as consumer fi nancial services; corporate and leisure travel management services; e-commerce retail solutions; and value-added agricultural solutions.

2. Review of activities Operational review Morvest’s performance for the year ended 31 May 2013 clearly refl ects the resilience and inherent strength of its

underlying businesses, resulting in revenue, EBITDA and headline earnings per share growing satisfactory despite continued pricing pressure from clients and tough market conditions. The South African and Nigerian markets are expected to remain challenging over the next 12 to 18 months despite positive signs of recovery. The domestic operations have performed well with satisfactory stable margins.

Share Repurchase During the year the company repurchased 48,8 million shares, with a value of R8,9 million, on the open market in terms

of the share repurchase programme. The company intends to continue repurchasing shares in the forthcoming years subject to Companies Act requirements.

3. Financial results and dividend The annual fi nancial results of the company and Group for the year ended 31 May 2013 are set out in the fi nancial

statements and accompanying notes.

On 27 August 2013, the Board proposed and resolved to declare a gross dividend of 1 cent per share.

4. Going concern The annual fi nancial statements have been prepared on the basis of accounting policies applicable to a going

concern. This basis assumes that funds will be available to fi nance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

5. Share capital On 31 May 2013 the authorised share capital of the company comprised 1 500 000 000 ordinary shares, of which

679 158 612 were in issue.

Subsequent to year-end a total of 21 329 734 shares acquired through the share repurchase programme have been cancelled from the issued share capital of the company. The issued share capital after the cancellation of the shares will be 657 828 878.

The company’s unissued shares have been placed under the control of the directors until the upcoming annual general meeting.

As at reporting date, the Group had a total of 76 647 257 treasury shares.

For further details refer to note 25 of the annual fi nancial statements.

6. BEE transaction Subsequent to year-end Morvest has entered into agreements by which it is proposing to implement a BEE transaction

in terms of which Executive and Non-Executive Directors of Morvest will obtain a shareholding in Morvest.

It is envisaged that the implementation of the BEE transaction will signifi cantly improve the company’s BEE credentials over the long-term and thereby ensure that Morvest will continue to maintain its competitive advantage in both the private and public sector. The Board of directors estimate that the BEE shareholding post the BEE transaction will be in excess of 52%, resulting in Morvest being black-controlled. The BEE transaction further addresses the impact of legislative requirements, including the Preferential Procurement Policy Framework Act, Act 5 of 2000 (“PPPFA”), which recognises only BEE ownership in relation to management, employees and staff who are shareholders and actively involved in the business of the company.

The circular for the approval of the BEE transaction has been posted to shareholders on 22 August 2013.


Directors’ report (continued)

7. Vendor obligations The following vendor obligations were discharged during the year:

VendorCash

R’000Total

R’000

R and S Consulting 10 000 10 000iSolve and SQLDB 7 200 7 200

17 200 17 200


8. Material changes in non-current assets During the reporting period the Group impaired R33,5 million of goodwill through its annual impairment test performed.

During the year, the Group acquired plant and machinery amounting to R39,9 million, upgrading the current machinery at Premium Ideas and Morvest Mithratech.

The Group continued the construction of the new offi ce building and costs for the reporting period date totalled R63 million (2012: R4,5 million). The new offi ce building was ready for its intended use on 29 July 2013. The costs to complete the construction subsequent to year-end is estimated to be R2,9 million.

Capitalised borrowing costs for the current year relating to the construction of the new offi ce building, amounted to R1,9 million with a capitalisation rate of 10,08%.

For further details on the non-current assets, refer to notes 13 to 17 of the annual fi nancial statements.

9. Directors The directors during the year, and as at the date of this report are as follows:

Name Class Changes

MS Varachia ExecutiveS Singh ExecutiveNM Singh Executive Resigned 15 June 2012A Evan ExecutiveM Papiyana ExecutivePS Molefe Independent non-executive#

NY Mhinga Independent non-executive#

B Marx Independent non-executive#

A Mohammadali-Haji Independent non-executive

# PS Molefe is the Chairman of the Board, B Marx is the Chairman of the Audit and Risk Committee and NY Mhinga is the Chairperson of the Remuneration Committee.

PS Molefe, NY Mhinga, B Marx and A Mohammadali-Haji will retire by rotation at the upcoming annual general meeting, and being eligible will stand for re-election.

10. Directors’ interests Directors’ interests in related parties are set out below:

Director Company

S Singh D and S Interiors and Gifting Proprietary Limited MS Varachia Morvest Retail Proprietary Limited


11. Directors’ emoluments Directors’ emoluments are set out in note 41.1 of the annual fi nancial statements.

12. Directors’ shareholding Directors’ shareholdings are set out in notes 41.2 and 41.3 of the annual fi nancial statements.


13. Company Secretary The Company Secretary is Noelene Beryl January whose business and postal addresses, which are also the registered

addresses of the company, are set out below:

Business address: 188 4th Road Noordwyk Midrand 1685

Postal address: PO Box 4307 Halfway House Midrand 1685

14. Special resolutions The following resolutions were passed at the annual general meeting held on 29 November 2012: • A special resolution was granted to give general authority to the company and its subsidiaries to repurchase Morvest

shares in the open market. • A special resolution was approved, in terms of section 45 of the Companies Act, 71 of 2008, whereby the company

may at any time from the approval of this resolution date, for two years, provide any direct or indirect fi nancial assistance to any one person or more related or interrelated companies or corporations of the company.

• A special resolution, was resolved that in terms of section 66(9) of the Companies Act, the company is authorised to pay remuneration to its directors for the services as directors.

15. Subsidiaries, Associates and other investments Information relating to the company’s fi nancial interest in its subsidiaries, associates and other investments is set out

in notes 17 to 19 of the annual fi nancial statements.

16. Aggregate net income and loss in subsidiaries

Subsidiary

Net income/(loss)

R’000

Aggregate net income generated by subsidiaries 140 391 Aggregate net loss generated by subsidiaries (49 479)

The above net income/(loss) in subsidiaries is before non-controlling interest.

17. Borrowing limitations In terms of the articles of association of the company, the directors may exercise all the powers of the company to

borrow money, as they consider appropriate.

18. Subsidiaries’ dividends The dividends already declared by subsidiaries and paid to shareholders during the year are as refl ected in the

statement of changes in equity.

19. Auditors PKF (Gauteng) Inc. were appointed in offi ce in accordance with section 90(6) of the South African Companies Act,

2008, and will continue in offi ce subject to shareholder approval at the upcoming annual general meeting.

20. Subsequent events Further details of the subsequent events are set out in note 42 of the annual fi nancial statements.


Accounting policies

1. Reporting entity Morvest Business Group Limited is a company domiciled in the Republic of South Africa. The consolidated fi nancial

statements of the company as at and for the year ended 31 May 2013 comprise the company and its subsidiaries (together referred to as the Group and individually as Group entities) and the Group’s interest in associates. The Group’s operations are aligned into three key divisions: Business Support Services (including Professional Services and Outsourcing Solutions), ICT Solutions and Retail and Consumer Services (see note 1).

2. Basis of preparation a) Statement of compliance The consolidated fi nancial statements have been prepared in compliance with the Companies Act of South Africa,

2008, International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, and the JSE Listings Requirements that are relevant to its operations and have been effective for the annual reporting period ending 31 May 2013.

The consolidated fi nancial statements were authorised for issue by the Board of directors on 27 August 2013.

b) Basis of measurement The consolidated and separate fi nancial statements have been prepared on the historical cost basis except for

fi nancial instruments, which have been accounted for in terms of IAS 39.

c) Signifi cant estimates, judgements and assumptions The preparation of fi nancial statements in conformity with IFRS requires management to make judgements,

estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

In particular, information about signifi cant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most signifi cant effect on the amounts recognised in the fi nancial statements, are also described in the accounting policy notes that follow and the following fi nancial statement notes:

Note 13 – Property, plant and equipment Note 14 – Goodwill Note 15 – Business combinations Note 19 – Other fi nancial assets Note 20 – Deferred taxation Note 21 – Inventories Note 22 – Trade and other receivables Note 31 – Provisions Note 35 – Share-based payments

Impairment testing The recoverable amounts of cash-generating units and individual assets have been determined based on the

higher of value in use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that the revenue growth rate and operating margin assumptions may change, which may then impact the estimations made and may then require a material adjustment to the carrying amount of goodwill and intangible assets.

The Group reviews and tests the carrying amount of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. Assets are grouped at the lowest level for which identifi able cash fl ows are largely independent of cash fl ows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash fl ows for each group of assets. Expected future cash fl ows used to determine the value in use of goodwill and intangible assets are inherently uncertain and could materially change over time. They are


signifi cantly affected by a number of factors including production estimates, supply demand, project demands,

tender specifi c jobs, operating margins and long-term contracts together with economic factors such as infl ation,

interest rates, exchange rates and other industry specifi c factors.

Taxation Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are

many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course

of business. The company recognises liabilities for anticipated tax audit issues based on estimates of whether

additional taxes will be due. Where the fi nal tax outcome of these matters is different from the amounts that were

initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which

such determination is made.

The Group recognises the net future tax benefi t related to deferred income tax assets to the extent that it is probable

that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of

deferred income tax assets requires the company to make signifi cant estimates related to expectations of future

taxable income. Estimates of future taxable income are based on forecast cash fl ows from operations and the

application of existing tax laws in each jurisdiction. To the extent that future cash fl ows and taxable income differ

signifi cantly from estimates, the ability of the company to realise the net deferred tax assets recorded at the

reporting date could be impacted.

d) Functional and presentation currency These consolidated and separate fi nancial statements are presented in South African Rand (“ZAR”), which is

the company’s functional currency. All fi nancial information presented in Rand has been rounded to the nearest

thousand.

e) Going concern The consolidated and separate fi nancial statements are prepared on the going-concern basis.

3. Financial reporting terms These defi nitions of fi nancial reporting terms are provided to ensure clarity of meaning as certain terms may not

always have the same meaning or interpretation in all countries.

a) General accounting terms

Associate An entity, other than a subsidiary or joint venture, in which the Group, holds a material long-term interest, has significant influence, but no control, over financial and operating policies.

Company A legal business entity registered in terms of the applicable legislation of that country.

Foreign operation An entity whose activities are based or conducted in a country or currency other than those of the reporting entity (Morvest Business Group Limited).

Operation A component of the Group:– that represents a separate major line of business or geographical area of operation; and– is distinguished separately for financial and operating purposes.

Group The Group comprises Morvest Business Group Limited, its subsidiaries and its interest in associates and special purpose entities.

Subsidiary Any entity over which the Group has the power to exercise control.

Special purpose entity An entity established to accomplish a narrow and well-defined objective, including the facilitation of the Group’s black economic empowerment transactions, and where the Group receives the majority of the benefits related to the operations and net assets of the entity, is exposed to the majority of the risks incident to the entity’s activities, and retains the majority of the residual or ownership risks related to the entity or its assets.

Acquisition date The date on which control in subsidiaries, special purpose entities, joint control in joint ventures and significant influence in associates, commences.


Accounting policies (continued)

Cash-generating unit The smallest identifi able group of assets which can generate cash infl ows independently from other assets or groups of assets.

Consolidated Group financial statements

The financial results of the Group which comprise the financial results of Morvest Business Group Limited and its subsidiaries, special purpose entities, the proportionate interest in the financial results of joint ventures, and its interest in associates.

Control The ability, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. When assessing the ability to control an entity, the existence and effect of potential voting rights that are presently exercisable or convertible are taken into account.

Discount rate The rate used for purposes of determining discounted cash flows defined as the yield on AAA credit rated bonds (for entities outside South Africa) and relevant South African Government bonds (for South African entities) that have maturity dates approximating the term of the related cash flows. This pre-tax interest rate reflects the current market assessment of the time value of money. To the extent that, in determining the cash flows, the risks specific to the asset or liability are taken into account in determining those cash flows, they are not included in determining the discount rate.

Disposal date The date on which control in subsidiaries, special purpose entities, and significant influence in associates, ceases.

Fair value The value for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

Functional currency The currency of the primary economic environment in which the entity operates.

Long-term A period longer than 12 months from the reporting date.

Other comprehensive income

Comprises items of income and expense (including reclassification adjustments) that are not recognised in profit or loss and includes the effect of translation of foreign operations and available-for-sale financial assets.

Recoverable amount The amount that reflects the greater of the fair value less costs to sell and value in use that can be attributed to an asset as a result of its ongoing use by the entity. In determining the value in use, expected future cash flows are discounted to their present values using the discount rate.

Related party Parties are considered to be related if one party, directly or indirectly, has the ability to control or jointly control the reporting entity (Morvest Business Group Limited) or exercise significant influence over the reporting entity or is a member of the key management of the reporting entity.

Revenue Comprises turnover, dividends received and interest received.

Share-based payment A transaction in which an entity issues equity instruments, share options or incurs a liability to pay cash based on the price of the entity’s equity instruments to another party as compensation for goods received or services rendered.

Significant influence The ability, directly or indirectly, to participate in, but not exercise control over, the financial and operating policy decisions of an entity so as to obtain economic benefit from its activities.

Turnover Comprises revenue generated by operating activities and includes sales of products, services rendered, licence fees and royalties, net of indirect taxes, rebates and trade discounts.


b) Financial instrument terms

Available-for-sale financial asset

A financial asset that has been designated as available-for-sale or a financial asset other than those classified as loans and receivables, held-to-maturity investments or derivative instruments.

An investment intended to be held for an indefinite period of time, which may be sold in response to liquidity needs or changes in interest rates, is classified as a non-current available-for-sale financial asset.

Effective interest rate The derived rate that discounts the expected future cash flows to the current net carrying amount of the financial asset or financial liability.

Equity instrument Any financial instrument (including investments), that evidences a residual interest in the assets of an enterprise after deducting all of its liabilities.

Financial asset Cash or cash equivalents, a contractual right to receive cash, an equity instrument or a contractual right to exchange a financial instrument under favourable conditions.

Financial liability A contractual obligation to pay cash or transfer other benefits or an obligation to exchange a financial instrument under unfavourable conditions. This includes debt.

Loans and receivables A financial asset with fixed or determinable repayments that are not quoted in an active market, other than:– a derivative instrument; or– an available-for-sale financial asset.

4. Signifi cant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these consolidated

fi nancial statements, and have been applied consistently by Group entities.

4.1 Basis of consolidation The Consolidated fi nancial statements refl ect the fi nancial results of the Group. All fi nancial results are

consolidated with similar items on a line by line basis except for investments in associates, which are included in the Group’s results as set out below.

Inter-company transactions, balances and unrealised gains and losses between entities are eliminated on consolidation. To the extent that a loss on a transaction provides evidence of a reduction in the net realisable value of current assets or an impairment loss of a non-current asset, that loss is charged to profi t or loss.

In respect of associates, unrealised gains and losses are eliminated to the extent of the Group’s interest in these entities. Unrealised gains and losses arising from transactions with associates are eliminated against the investment in the associate.

a) Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or

indirectly, to govern the fi nancial and operating policies of an entity to the exclusion of all others, so as to obtain benefi ts from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The fi nancial results of the subsidiaries are included in the consolidated fi nancial statements from the date that control commences up to the effective date of disposal at which date control ceases.

Investments in subsidiaries in the company’s separate annual fi nancial statements are stated at cost less impairment losses. Transaction costs relating to the acquisition of a subsidiary are expensed during the year. They occur in profi t or loss.

b) Special purpose entities The Group has established two special purpose entities (“SPE”) for the BEE transaction. The fi nancial results

of the SPE are consolidated into the Group’s results from the date that the Group controls the SPE until the date that control ceases. Control is based on an evaluation of the substance of the SPE’s relationship with the Group and the SPE’s risks and rewards.



c) Equity-accounted investee

Associates are those entities in which the Group has signifi cant infl uence, but not control, over the fi nancial

and operating policies. Signifi cant infl uence is presumed to exist when the Group holds between 20% and

50% of the voting power of another entity.

Investments in associates are accounted for using the equity method (equity-accounted investees) and are

recognised initially at cost. The cost of the investment includes transaction costs.

The consolidated fi nancial statements include the Group’s share of the profi t or loss and other comprehensive

income, after adjustments to align the accounting policies with those of the Group, from the date that

signifi cant infl uence commences until the date that signifi cant infl uence ceases.

When the Group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount

of that interest, including any long-term investments, is reduced to zero, and the recognition of further losses

is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the

investee.

d) Acquisition of non-controlling interests

The recognition of an increase and decrease in ownership interests in subsidiaries without a change in

control is accounted for as an equity transaction in the consolidated fi nancial statements. Accordingly, any

premium or discount on subsequent purchases of an equity instrument from the non-controlling interest is

recognised directly in the parent shareholders’ equity.

4.2 Business combinations The acquisition method is used when a business is acquired. A business may comprise an entity, group of

entities or an unincorporated operation including its operating assets and associated liabilities.

On acquisition date, fair values are attributed to the identifi able assets, liabilities and contingent liabilities. A

non-controlling interest at acquisition date is determined as the non-controlling shareholders’ proportionate

share of the carrying amount of the net identifi able assets of the entity acquired. Non-controlling interests may

also be fair value. At each acquisition, the Group decides which method to account for the non-controlling

interest.

The consideration transferred is the fair value of the Group’s contribution to the business combination in the

form of assets transferred, shares issued, liabilities assumed or contingent consideration at the acquisition

date. Transaction costs directly attributable to the acquisition are charged to profi t or loss.

To the extent that the fair value of the net identifi able assets of the entity acquired exceeds the consideration

transferred and the recognised amount of non-controlling interests, the excess is recognised in profi t or loss on

acquisition date. The profi t or loss realised on disposal or termination of an entity is calculated after taking into

account the carrying amount of any related goodwill.

The Group measures goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus

• the recognised amount of any non-controlling interests in the acquiree; plus

• if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree;

less

• the net recognised amount (generally fair value) of the identifi able assets acquired and liabilities assumed.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which

the combination occurs, the Group reports provisional amounts for the items for which the accounting is

incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional

assets or liabilities are recognised, to refl ect new information obtained about facts and circumstances that

existed at the acquisition date that, if known, would have affected the amounts recognised at that date.

The measurement period is the period from the date of acquisition to the date the Group obtains complete

information about facts and circumstances that existed as of the acquisition date – and is subject to a maximum

of one year.


a) Loss of control Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling

interests and the other components of equity-related to the subsidiary. Any surplus or defi cit arising on the loss of control is recognised in profi t or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale fi nancial asset depending on the level of infl uence retained.

4.3 Foreign currency translation Items included in the fi nancial results of each entity are measured using the functional currency of that entity.

The consolidated fi nancial results are presented in Rand, which is Morvest Business Group Limited’s functional and presentation currency, rounded to the nearest thousand.

a) Foreign currency transactions Income and expenditure transactions are translated into the functional currency of the entity at the rate

of exchange ruling at the transaction date. To the extent that transactions occur regularly throughout the year, they are translated at the average rate of exchange for the year since this is deemed to provide a good approximation of the actual exchange rates at which those transactions occurred.

Monetary assets and liabilities are translated into the functional currency of the entity at the rate of exchange ruling at the reporting date. Foreign exchange gains and losses resulting from the translation and settlement of monetary assets and liabilities are recognised in either profi t or loss or other comprehensive income.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in either profi t or loss or other comprehensive income.

b) Foreign operations The fi nancial results of all entities that have a functional currency different from the presentation currency

of their parent entity are translated into the presentation currency. Income and expenditure transactions of foreign operations are translated at the average rate of exchange for the year except for signifi cant individual transactions which are translated at the exchange rate ruling at that date. All assets and liabilities, including fair value adjustments and goodwill arising on acquisition, are translated at the rate of exchange ruling at the reporting date. Differences arising on translation are recognised as other comprehensive income and are included in the foreign currency translation reserve.

When the settlement of a monetary item, arising from a receivable or from payable to a foreign operation, is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented within equity in the foreign currency translation reserve.

On consolidation, differences arising from the translation of the net investment in a foreign operation are recognised as other comprehensive income and are included in the foreign currency translation reserve.

4.4 Financial instruments All fi nancial instruments are measured at fair value upon initial recognition when the Group becomes party to

the contractual terms of the instruments. Initial recognition of fi nancial instruments other than those carried at fair value through profi t and loss includes transaction costs. Subsequent to initial recognition, these instruments are measured as follows:

a) Financial assets The Group’s fi nancial assets are loans, trade and other receivables, cash and cash equivalents and available-

for-sale fi nancial assets.

Available-for-sale fi nancial assets Available-for-sale fi nancial assets are non-derivative fi nancial assets that are designated as available-for-sale

or are not classifi ed in any of the other categories of fi nancial assets. Available-for-sale fi nancial assets are measured at fair value and changes therein, are recognised in other comprehensive income and presented in the available-for-sale reserve in equity.



Loans and receivables Loans and receivables are fi nancial assets with fi xed or determinable payments that are not quoted in an

active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Appropriate allowances for estimated irrecoverable amounts are recognised in profi t or loss when there is objective evidence that the asset is impaired. Signifi cant fi nancial diffi culties of the debtor, probability that the debtor will enter bankruptcy or fi nancial reorganisation, and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the effective interest rate computed at initial recognition.

The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profi t or loss within operating expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in profi t or loss.

Loans and receivables comprise loans, trade receivables, cash and cash equivalents and other receivables.

For all fi nancial instruments carried at amortised cost where the effects of time value of money are not considered to be material the instruments are not discounted as their face values approximate their amortised cost.

Cash and cash equivalents Subsequent to initial recognition, cash and cash equivalents are measured at amortised cost. For statement

of cash fl ow purposes, bank overdrafts are offset against bank and cash balances. Cash and cash equivalents comprise cash on hand and deposits held on call with banks.

b) Financial liabilities The Group’s fi nancial liabilities are trade and other payables, interest-bearing borrowings and non-interest-

bearing borrowings.

Trade and other payables All trade and other payables are measured at amortised cost, using the effective interest method.

Interest-bearing borrowings Interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption

value being recognised in profi t or loss over the period of the borrowings on an effective interest basis.

Non-interest-bearing borrowings Non-interest-bearing borrowings are stated at amortised cost.

For all fi nancial instruments carried at amortised cost where the effects of time value of money are not considered to be material the instruments are not discounted as their face values approximate their amortised cost.

c) Derecognition of fi nancial instruments Financial assets are derecognised if the Group’s contractual rights to the cash fl ows from the fi nancial assets

expire or if the Group transfers the fi nancial assets to another party without retaining control or substantially all risks and rewards of the asset.

Financial liabilities are derecognised if the Group’s obligations specifi ed in the contract expire or are discharged or cancelled.

d) Offsetting a fi nancial asset and a fi nancial liability Financial assets and fi nancial liabilities are offset and the net amount presented in the statement of fi nancial

position when, and only when, the Group has a current legally enforceable right to set off the recognised amount and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

In accounting for a transfer of a fi nancial asset that does not qualify for derecognition, the Group will not offset the transferred asset and the associated liability.


4.5 Financial liabilities and equity instruments Classifi cation as debt or equity Debt and equity instruments issued by a Group entity are classifi ed as either fi nancial liabilities or as equity in

accordance with the substance of the contractual arrangements and the defi nitions of a fi nancial liability and an equity instrument.

Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting

all of its liabilities. Equity instruments issued by the Group are recognised as the proceeds received, net of direct issue costs.

4.6 Share capital Ordinary shares Ordinary shares are classifi ed as equity. Incremental costs directly attributable to the issue of ordinary shares

are recognised as a deduction from equity, net of any tax effects.

Repurchase, disposal and reissue of share capital (treasury shares) When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes

directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classifi ed as treasury shares. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or defi cit on the transaction is presented in share premium.

Dividends Dividends are recognised as a liability in the period in which they are declared.

4.7 Property, plant and equipment Owned assets Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated

impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment, and is recognised net within other income/other expenses in profi t or loss.

Leased assets Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classifi ed

as fi nance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in the same manner as owned items of property, plant and equipment.

Other leases are operating leases and the leased assets are not recognised in the Group’s statement of fi nancial position.

Subsequent costs The Group recognises in the carrying amount of an item of property, plant and equipment, the cost of replacing

part of such an item when that cost is incurred, if it is probable that the future economic benefi ts embodied with the part will fl ow to the Group and its cost can be measured reliably, the carrying amount of the replaced part is derecognised. The costs of day-to-day servicing of property, plant and equipment are recognised in profi t or loss as incurred.

Depreciation Depreciation is based on the cost of an asset less its residual value.

Depreciation is recognised in profi t or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the



lease term and their useful lives of the asset. If it is reasonably certain that the Group will obtain ownership by

the end of the lease term, the asset is then depreciated over the useful life of the asset.

The residual value, useful life and depreciation methods for each asset are reviewed at the end of each fi nancial

year and adjusted if appropriate.

Assets under construction are not depreciated and only depreciated when they are available for use.

The estimated useful lives for the current and comparative years are as follows:

Item Average useful lifePlant and machinery 5 – 10 yearsMotor vehicles 5 – 8 yearsComputer equipment 3 – 6 yearsComputer software 5 – 8 yearsFurniture and fittings 10 – 13 yearsOffice equipment 6 – 9 yearsSecurity 5 yearsLeasehold improvements 6 yearsStudy material 3 yearsSignage 5 years

4.8 Goodwill For the measurement of goodwill at initial recognition, refer to accounting policy note 4.2.

Goodwill is measured at cost less accumulated impairment losses. In respect of equity-accounted investees,

the carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss

on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount

of the equity-accounted investee. Impairments to investments in associates are allocated to the investment as

a whole.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the

determination of the profi t or loss on disposal.

4.9 Intangible assets Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

The amortisation period and the amortisation method for intangible assets are reviewed at the end of each

fi nancial year and adjusted if appropriate.

Amortisation is provided to write down the intangible assets, on a straight-line basis, over the fi nite useful life of

the asset, to zero as follows:

Item Useful lifeCustomer contracts 2 – 5 yearsPatents 10 years

Amortisation methods, remaining useful lives and residual values are reassessed at the end of each reporting

period.

The useful lives of the customer contracts was revised in 2013. Refer to note 16.

The amortisation of intangible assets is included in other operating expenses in profi t or loss.

4.10 Inventories Inventories are measured at the lower of cost or net realisable value. The cost of inventories comprises of all

costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present

location and condition. The cost includes transport and handling costs, but excludes interest charges.

Costs are determined on the following bases:

• Raw materials are valued on a fi rst-in, fi rst-out (“FIFO”) basis.

• Merchandise is valued on a weighted average basis.

• Work in progress and fi nished goods on the weighted average basis.


Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of

completion and selling expenses.

Write-downs to net realisable value and inventory losses are expensed in the period in which the write-downs

or losses occur.

The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value,

is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the

reversal occurs. The amount of the reversal of the inventory write down is limited to the carrying amount of the

inventory had no write down been recognised initially.

4.11 Impairment a) Financial assets

A fi nancial asset is assessed at each reporting date to determine whether there is any objective evidence that

it is impaired. A fi nancial asset is considered to be impaired if objective evidence indicates that one or more

events have had a negative effect on the estimated future cash fl ows of that asset.

An impairment loss in respect of a fi nancial asset measured at amortised cost is calculated as the difference

between its carrying amount, and the present value of the estimated future cash fl ows discounted at the

original effective interest rate. An impairment loss in respect of an available-for-sale fi nancial asset is

calculated by reference to its fair value. A signifi cant or prolonged decline in the fair value of the security

below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for

available-for-sale fi nancial assets, the cumulative loss measured as the difference between the acquisition

cost and the current fair value, less any impairment loss on that fi nancial asset previously recognised in

comprehensive income. Impairment losses recognised in profi t or loss on equity instruments are not reversed

through profi t or loss.

Individually signifi cant fi nancial assets are tested for impairment on an individual basis. The remaining

fi nancial assets are assessed collectively in groups that share similar credit risk characteristics.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the

impairment loss was recognised. For fi nancial assets measured at amortised cost and available-for-sale

fi nancial assets that are debt securities, the reversal is recognised in profi t or loss.

b) Non-fi nancial assets

The carrying amounts of the Group’s non-fi nancial assets, other than inventories and deferred tax assets,

are reviewed at each reporting date to determine whether there is any indication of impairment. If any such

indication exists, the asset’s recoverable amount is estimated.

Goodwill is tested for impairment in terms of IAS 36 at least annually. For goodwill, the recoverable amount

is estimated at each reporting date.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value

less costs to sell. In assessing value in use, the estimated future cash fl ows are discounted to their present

value using a pre-tax discount rate that refl ects current market assessments of the time value of money and

the risks specifi c to the asset. For the purpose of impairment testing, assets are grouped together into the

smallest groups of assets that generate cash infl ows from continuing use that are largely independent of

the cash fl ows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a

business combination, for the purpose of impairment testing, is allocated to cash-generating units that are

expected to benefi t from the synergies of the combination.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit

exceeds its recoverable amount. Impairment losses are recognised through profi t and loss.

Impairment losses recognised in respect of cash-generating units are allocated fi rst to reduce the carrying

amount of any goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying

amount of the other assets in the unit (group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed.



In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date

for any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has

been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the

carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss

had been recognised.

4.12 Provisions A provision is recognised in the statement of fi nancial position when the Group has a present legal or constructive

obligation, that can be estimated reliably, as a result of a past event, and it is probable that an outfl ow of

economic benefi ts will be required to settle the obligation. If the effect is material, provisions are determined

by discounting the expected future cash fl ows at a pre-tax rate that refl ects current market assessments of the

time value of money and, where appropriate, the risks specifi c to the liability.

The amount recognised as a provision is the best estimate of the consideration required to settle the present

obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the

obligation.

4.13 Income tax a) Income tax expense Current tax and deferred taxes are charged or credited directly to equity or other comprehensive income if

the tax relates to items that are credited or charged, in the same or a different period, directly to equity or in

other comprehensive income.

Income tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profi t

or loss except to the extent that it relates to a business combination, or items recognised directly in equity or

in other comprehensive income.

b) Current taxation Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax

rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of

previous years.

Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount

already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is

recognised as an asset.

c) Deferred taxation Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in

the fi nancial statements and the corresponding tax bases used in the computation of taxable profi t. Deferred

tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally

recognised for all deductible temporary differences to the extent that it is probable that taxable profi ts

will be available against which those deductible temporary differences can be utilised. Such deferred tax

assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial

recognition (other than in a business combination) of other assets and liabilities in a transaction that affects

neither the taxable profi t/loss nor the accounting profi t/loss.

Deferred tax liabilities are not recognised for taxable temporary differences associated with investments in

subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the

reversal of the temporary difference and it is probable that the temporary difference will not reverse in the

foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such

investments and interests are only recognised to the extent that it is probable that there will be suffi cient

taxable profi ts against which to utilise the benefi ts of the temporary differences and they are expected to

reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to

the extent that it is no longer probable that suffi cient taxable profi ts will be available to allow all or part of the

asset to be recovered.


Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets refl ects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

4.14 Revenue Revenue is measured at the fair value of the consideration received or receivable for the sales of goods and the

rendering of services in the ordinary course of the Group’s activities. Revenue is shown net of value-added-tax, returns, rebates and discounts.

Goods sold and services rendered The Group recognises revenue if the amount of revenue can be reliably measured, it is probable that future

economic benefi ts will fl ow to the entity and specifi c criteria have been met for each of the Group’s activities as described below.

a) Sales of goods Revenue from the sale of goods is recognised in profi t or loss when a signifi cant portion of the risks and

rewards of ownership have been transferred to the buyer and the Group no longer retains managerial involvement or control over the goods. Service fees included in the price of the product are recognised as revenue over the period during which the service is performed.

b) Rendering of services Revenue from services rendered is recognised in profi t or loss in proportion to the stage of completion of

the transaction at the reporting date. The stage of completion is assessed by reference to the percentage of completion of contracts and service level agreements.

c) Rental income Rental income from subleased property is recognised on a straight-line basis over the term of the lease.

d) Dividends received Dividends are recognised, in profi t or loss, when the company’s right to receive payment has been established.

e) Deferred income Revenue received before goods and services are delivered is recognised as deferred income and transferred

to profi t and loss once the goods are delivered and when the services and been performed.

4.15 Employee benefi ts Short-term employee benefi ts The cost of short-term employee benefi ts, are recognised in the period in which the service is rendered and are

not discounted.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs.

The expected cost of profi t sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

Defi ned contribution plans Payments to defi ned contribution retirement benefi t plans are charged as an expense as they fall due. The plan

is governed by the Pension Funds Act.

Share-based payments The Group issues equity-settled share options to its executive employees and management The fair value of

options granted is recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and is spread over the period during which the employees become unconditionally entitled to the option. Fair value is measured using the Binomial option-pricing model taking into account the term and conditions upon which the options were granted. The Group revises at each reporting date its estimate of the



number of options that are expected to vest based on the non-market vesting conditions. The impact of the revision to original estimates, if any, are recognised in profi t or loss with a corresponding adjustment to equity.

Share-based payments granted that do not vest until the counterparty completes a specifi ed period of service, are accounted for as the services are rendered by the counterparty.

The key assumptions for staff turnover per annum, early-exercise multiple, risk-free rate, share price volatility and dividend yield are based on management’s best estimate at the date of valuation.

Refer to note 35 of the fi nancial statements for further details.

4.16 Expenses Leased payments a) Operating lease payments Payments made under operating leases are recognised in profi t or loss on a straight-line basis over the term

of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

b) Finance lease payments Minimum lease payments are apportioned between the fi nance expense and the reduction of the outstanding

liability. The fi nance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

c) Interest paid The interest expense component of fi nance lease payments is recognised in profi t and loss using the effective

interest rate method.

4.17 Investment income and fi nance costs Finance income comprises interest income on funds invested (including available-for-sale fi nancial assets),

dividend income and gains on the disposal of available-for-sale fi nancial assets.

Finance costs comprise interest expense on borrowings, fi nance leases and bank overdrafts.

4.18 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which

are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the costs of those assets when it is probable that they will result in future economic benefi ts for the Group and the cost can be reliably measured, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specifi c borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profi t or loss in the period in which they are incurred.

4.19 Earnings per share and headline earnings per share a) Earnings per share The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per

share is calculated by dividing the profi t or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted earnings per share is determined by adjusting the profi t or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares.

b) Headline earnings per share Headline earnings per share is calculated as per the rules set out in circular 3/2012 – Headline Earnings.

4.20 Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn

revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s


Chief Executive Offi cer to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete fi nancial information is available.

Segment results that are reported to the Chief Executive Offi cer include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the company’s headquarters), head offi ce expenses, and income tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill.

5. Determination of fair values A number of the Group’s accounting policies and disclosures require the determination of fair value, for both fi nancial

and non-fi nancial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specifi c to that asset or liability.

Business combinations Fair values of all identifi able assets and liabilities included in the business combination are determined by reference

to market values of those or similar items, where available, or by discounting expected future cash fl ows using the Group’s discount rate to present values.

The fair value of property, plant and equipment recognised as a result of a business combination is the estimated amount for which a property could be exchanged on the date of acquisition between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably.

Equity and debt securities The fair value of equity and debt securities is determined by reference to their quoted closing bid price at the reporting

date, or if unquoted, determined using a valuation technique. Valuation techniques employed include market multiples and discounted cash fl ow analysis using expected future cash fl ows and a market-related discount rate.

Loans and other receivables The fair value of loans and other receivables, is estimated at the present value of future cash fl ows, discounted at the

market rate of interest at the reporting date. This fair value is determined for disclosure purposes or when acquired in a business combination.

Other liabilities at amortised cost Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal

and interest cash fl ows, discounted at the market rate of interest at the reporting date. For fi nance leases the market rate of interest is determined by reference to similar lease agreements.

Share-based payments Fair value of the options is measured using the Binomial option-pricing models where applicable. The expected life

used in the models has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations such as volatility, dividend yield and the vesting period. The fair value takes into account the terms and conditions on which these incentives are granted.

6. New standards and interpretations 6.1 Standards and interpretations in issue not yet effective At the date of the authorisation of these fi nancial statements, the following standards and interpretations were

in issue but not effective:

IFRS 1: First-time Adoption of International Financial Reporting Standards • Amendments add an exception to the retrospective application of IFRSs to require that fi rst-time adopters

apply the requirements in IFRS 9: Financial Instruments and IAS 20: Accounting for Government Grants and Disclosure of Government Assistance prospectively to government loans existing at the date of transition to IFRSs.*

• Annual Improvements 2009 – 2011 Cycle amendments clarify the options available to users when repeated application of IFRS 1 is required and to add relevant disclosure requirements.*

• Annual Improvements 2009 – 2011 Cycle amendments to borrowing costs.* * Annual periods beginning on or after 1 January 2013



IFRS 7: Financial Instruments • Amendments require entities to disclose gross amounts subject to rights of set-off, amounts set off in

accordance with the accounting standards followed, and the related net credit exposure. This information

will help investors understand the extent to which an entity has set off in its balance sheet and the effects of

rights of set-off on the entity’s rights and obligations.* * Annual periods beginning on or after 1 January 2013

IFRS 9: Financial Instruments • New standard that forms the fi rst part of a three-part project to replace IAS 39: Financial Instruments:

Recognition and Measurement.* * Annual periods beginning on or after 1 January 2015

IFRS 10: Consolidated Financial Statements • New standard that replaces the consolidation requirements in SIC-12: Consolidation – Special Purpose

Entities and IAS 27: Consolidated and Separate Financial Statements. Standard builds on existing principles

by identifying the concept of control as the determining factor in whether an entity should be included within

the consolidated fi nancial statements of the parent company and provides additional guidance to assist in the

determination of control where this is diffi cult to assess.*

• Amendments to the transition guidance of IFRS 10: Consolidated Financial Statements, IFRS 11: Joint

Arrangements and IFRS 12: Disclosure of Interests in Other Entities, thus limiting the requirements to provide

adjusted comparative information.*

• IFRS 10: exception to the principle that all subsidiaries must be consolidated. Entities meeting the defi nition

of “Investment Entities” must be accounted for at fair value under IFRS 9: Financial Instruments, or IAS 39:

Financial Instruments: Recognition and Measurement.** * Annual periods beginning on or after 1 January 2013 ** Annual periods beginning on or after 1 January 2014

IFRS 11: Joint Arrangements • New standard that deals with the accounting for joint arrangements and focuses on the rights and obligations

of the arrangement, rather than its legal form. Standard requires a single method for accounting for interests

in jointly controlled entities.*



adjusted comparative information.* * Annual periods beginning on or after 1 January 2013

IFRS 12: Disclosure of Interests in Other Entities • New and comprehensive standard on disclosure requirements for all forms of interests in other entities,

including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.*



adjusted comparative information.*

• New disclosures required for Investment Entities (as defi ned in IFRS 10).** * Annual periods beginning on or after 1 January 2013 ** Annual periods beginning on or after 1 January 2014

IFRS 13: Fair Value Measurement • New guidance on fair value measurement and disclosure requirements.* * Annual periods beginning on or after 1 January 2013

IAS 1: Presentation of Financial Statements • New requirements to Group together items within OCI that may be reclassifi ed to the profi t or loss section of

the income statement in order to facilitate the assessment of their impact on the overall performance of an

entity.*

• Annual improvements 2009 – 2011 Cycle: Amendments clarifying the requirements for comparative information

including minimum and additional comparative information required.** * Annual periods beginning on or after 1 July 2012 ** Annual periods beginning on or after 1 January 2013


IAS 16: Property, Plant and Equipment • Annual Improvements 2009 – 2011 Cycle: Amendments to the recognition and classifi cation of servicing

equipment.* * Annual periods beginning on or after 1 January 2013

IAS 19: Employee Benefi ts • Amendments to the accounting for current and future obligations resulting from the provision of defi ned

benefi t plans.* * Annual periods beginning on or after 1 January 2013

IAS 27: Consolidated and Separate Financial Statements • Consequential amendments resulting from the issue of IFRS 10, 11 and 12.* • Requirement to account for interests in “Investment Entities” at fair value under IFRS 9: Financial Instruments,

or IAS 39: Financial Instruments: Recognition and Measurement, in the separate fi nancial statements of a parent.**

* Annual periods beginning on or after 1 January 2013 ** Annual periods beginning on or after 1 January 2014

IAS 28: Investments in Associates • Consequential amendments resulting from the issue of IFRS 10, 11 and 12.* * Annual periods beginning on or after 1 January 2013

IAS 32: Financial Instruments: Presentation • Amendments require entities to disclose gross amounts subject to rights of set-off, amounts set off in

accordance with the accounting standards followed, and the related net credit exposure. This information will help investors understand the extent to which an entity has set off in its balance sheet and the effects of rights of set-off on the entity’s rights and obligations.*

• Annual Improvements 2009 – 2011 Cycle: Amendments to clarify the tax effect of distribution to holders of equity instruments.*

* Annual periods beginning on or after 1 January 2013

IAS 34: Interim Financial Reporting • Annual Improvements 2009 – 2011 Cycle: Amendments to improve the disclosures for interim fi nancial

reporting and segment information for total assets and liabilities.* * Annual periods beginning on or after 1 January 2013

The Group is considering what the impact of these new standards on the Group and company will be.

All standards and interpretations will be adopted at their effective dates (except for those standards and interpretations that are not applicable to the entity).


for the year ended 31 May 2013

Statements of comprehensive income

Notes

Group Company

2013 R’000

2012R’000

2013 R’000

2012R’000

Revenue 2 956 164 868 576 50 736 48 807

Cost of sales (427 351) (410 937) – –

Gross profit 528 813 457 639 50 736 48 807 Other income 913 3 009 – 106 096 Other operating expenses (475 505) (398 986) (56 480) (44 442)

Operating(loss)/profit 3 54 221 61 662 (5 744) 110 461 Investment income 6 3 139 2 942 25 732 9 409 Finance costs 7 (11 189) (15 854) (9 539) (9 688) Profit on sale of business 8 6 985 – – – Share of loss from associates 9 – (2 406) – –

Profit before taxation 53 156 46 344 10 449 110 182 Taxation 10 (29 579) (23 374) (67) 2 566

Profit after taxation 23 577 22 970 10 382 112 748

Other comprehensive income/(loss) for the yearExchange differences on translating foreign operations 2 087 867 – – Recycling of available-for-sale financial asset – (127) – 107 Taxation effect of the recycling of available-for-sale financial asset – 20 – (20)

Total comprehensive income for the year 25 664 23 730 10 382 112 835

Profit attributable to:Equity holders of the parent 11 643 12 194 10 382 112 748 Non-controlling interest 11 934 10 776 – –

23 577 22 970 10 382 112 748

Total comprehensive income attributable to:Owners of the parent 13 730 12 954 10 382 112 835 Non-controlling interest 11 934 10 776 – –

25 664 23 730 10 382 112 835

Earnings per share – Basic (cents per share) 11 2,38 2,33 – Diluted (cents per share) 11 2,38 1,85


at 31 May 2013

Statements of fi nancial position

Notes

Group Company

2013 R’000

2012R’000

2013 R’000

2012R’000

AssetsNon-current assets 353 300 315 181 434 545 448 424

Property, plant and equipment 13 143 735 44 254 1 056 1 308 Goodwill 14 150 680 178 067 – – Intangible assets 16 1 780 41 045 – – Investments in subsidiaries 17 – – 395 266 412 266 Investment in associates 18 – – – – Other financial assets 19 – – 23 688 20 249 Deferred taxation 20 57 105 51 815 14 535 14 601

Current assets 328 945 327 677 196 928 97 626

Inventories 21 30 455 65 049 – – Trade and other receivables 22 194 488 146 311 34 241 36 917 Other financial assets 19 5 534 836 – – Taxation receivables 15 095 11 523 – – Loans to Group companies 23 – – 156 764 58 821 Operating lease assets 242 226 226 226 Cash and cash equivalents 24 83 131 103 732 5 697 1 662

Total assets 682 245 642 858 631 473 546 050

Equity and liabilitiesCapital and reserves 229 582 228 711 150 969 145 962

Share capital 25 287 435 296 408 323 918 323 918 Foreign currency translation reserve 26 (10 067) (12 154) – – Accumulated losses (50 868) (57 432) (176 031) (179 845) Share-based payment reserve 3 082 1 889 3 082 1 889

Non-controlling interest 36 979 38 688 – –

Total equity 266 561 267 399 150 969 145 962 Non-current liabilities 87 141 100 679 42 237 79 034

Vendor liabilities 27 4 717 14 114 – 14 114 Other financial liabilities 28 56 991 65 485 42 237 64 920 Finance lease obligations 29 19 590 5 744 – – Deferred taxation 20 5 843 15 336 – –

Current liabilities 328 543 274 780 438 267 321 054

Vendor liabilities 27 17 714 8 056 14 114 8 056 Other financial liabilities 28 27 892 16 509 22 528 14 708 Finance lease obligations 29 8 735 3 774 – 21 Loans from Group companies 23 – – 378 308 287 246 Trade and other payables 30 244 079 232 166 23 317 10 714 Provisions 31 180 250 – – Operating lease liabilities 1 079 898 – 309 Current tax payables 28 864 13 127 – –

Total equity and liabilities 682 245 642 858 631 473 546 050



Statement of changes in equity

Attributable to equity holders of the parent

Share capital R’000

Share premium

R’000

Avail-able-

for-sale reserve R’000

Share based

payment reserve R’000

Foreign currency

trans-lation

reserve R’000

Accu-mulated

losses R’000

Total R’000

Non-control-

ling interest

R’000

Total equity R’000

GroupBalance at 31 May 2011 53 298 560 107 696 (13 021) (64 342) 222 053 36 843 258 896 Profit for the year – – – – – 12 194 12 194 10 776 22 970 Other comprehensive income for the year – – (107) – 867 – 760 – 760

Total comprehensive income for the year – – (107) – 867 12 194 12 954 10 776 23 730 Share-based payment expense – – – 1 193 – – 1 193 – 1 193 Share repurchases (1) (2 204) – – – – (2 205) – (2 205) Dividends paid – – – – – (5 284) (5 284) – (5 284) Dividends to non-controlling interest – – – – – – – (8 931) (8 931)

Balance at 31 May 2012 52 296 356 – 1 889 (12 154) (57 432) 228 711 38 688 267 399

Profit for the year – – – – – 11 643 11 643 11 934 23 577 Other comprehensive income for the year – – – – 2 087 – 2 087 – 2 087

Total comprehensive income for the year – – – 2 087 11 643 13 730 11 934 25 664 Share-based payment expense – – 1 193 – – 1 193 – 1 193 Share repurchases (1) (8 972) – – – – (8 973) – (8 973) Startup companies non-controlling interest portion – – – – – – – 603 603 Acquisition of subsidiaries non-controlling interest portion – – – – – – – 6 227 6 227 Dividends paid – – – – – (5 079) (5 079) – (5 079) Dividends to non-controlling interest – – – – – – – (20 473) (20 473)

Balance at 31 May 2013 51 287 384 – 3 082 (10 067) (50 868) 229 582 36 979 266 561

Notes 25 25 26


Share capital R’000

Share premium

R’000

Share- based

payment reserve

R’000

Available-for-sale reserve R’000

Accumu-lated

losses R’000

Total equity R’000

CompanyBalance at 31 May 2011 68 323 850 696 107 (287 309) 37 412 Profit for the year – – – – 112 748 112 748 Other comprehensive income for the year – – – (107) – (107)

Total comprehensive Income for the year – – – (107) 112 748 112 641 Share-based payment expense – – 1 193 – – 1 193 Dividend paid – – – – (5 284) (5 284)

Balance at 31 May 2012 68 323 850 1 889 – (179 845) 145 962

Profit for the year – – – – 10 382 10 382 Other comprehensive income for the year – – – – – –

Total comprehensive income for the year – – – – 10 382 10 382 Share-based payment expense – – 1 193 – – 1 193 Dividends paid – – – – (6 568) (6 568)

Balance at 31 May 2013 68 323 850 3 082 – (176 031) 150 969

Notes 25 25



Statements of cash fl ows

Group Company

Notes2013

R’000 2012

R’0002013

R’000 2012

R’000

Cash flows from operating activitiesCash generated by operations 36 138 533 136 134 32 445 6 667 Investment income 6 3 139 2 942 5 292 9 409 Dividends received – subsidiaries 6 – – 12 765 8 061 Taxation paid 37 (33 186) (38 758) – – Finance costs (9 147) (12 938) (9 539) (9 688)

Net cash from operating activities 99 339 87 380 40 963 14 449

Cash flows from investing activitiesProceeds on disposal of property, plant and equipment 1 559 6 286 – – Acquisition of property, plant and equipment 13 (82 638) (31 667) (231) (545) Increase in loans to Group companies – – (6 593) (35 625) Business acquired 15 5 657 – – – Proceed on sale of business 38 17 290 – – –Decrease in financial assets 1 677 4 537 1 350 4 753

Net cash used in investing activities (56 455) (20 844) (5 474) (31 417)

Cash flows from financing activitiesShare repurchase (8 973) (2 205) – – (Decrease)/increase in financial liabilities (19 957) (11 770) (14 865) – Increase in financial liabilities 14 700 – – 39 243 Decrease in finance lease liabilities (13 703) (2 368) (21) (143) Decrease of vendor liabilities (10 000) (17 000) (10 000) (17 000) Dividends paid (25 552) (14 215) (6 568) (5 284)

Net cash (used in)/generated by financing activities (63 485) (47 558) (31 454) 16 816

Net increase/(decrease) in cash and cash equivalents (20 601) 18 978 4 035 (152) Cash and cash equivalents at the beginning of the year 103 732 84 754 1 662 1 814

Cash and cash equivalents at the end of the year 24 83 131 103 732 5 697 1 662



Notes to the fi nancial statements

1. Segment reportThe Group has three reportable segments, as described below, which are the Group’s strategic divisions. The strategic divisions offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic divisions, the Group’s Chief Executive Officer (the chief operating decision maker) reviews internal management reports on at least a quarterly basis. The following summary describes the operations in each of the Group’s reportable segments:Business Support Services – this operating segment focuses on consulting, professional services and outsourcing services. ICT Solutions – this operating segment focuses on the application, implementation and infrastructure services. Corporate – this operating segment renders management services to the Group.

The Group started a new retail and consumer segment during the 2012 financial year. However, this segment does not meet the requirements of IFRS 8 for it to be reported separately and has been included in the ICT Solutions segment.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit after income tax, as included in the internal management reports that are reviewed by the Group’s Chief Executive Officer. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

Business Support Services ICT Solutions Corporate Eliminations Total

2013 R’000

2012 R’000

2013 R’000

2012 R’000

2013 R’000

2012 R’000

2013 R’000

2012 R’000

2013 R’000

2012 R’000

Revenue External sales 560 927 525 423 395 237 343 153 – – – – 956 164 868 576 Intersegmental revenue 45 543 4 556 224 023 16 643 183 310 78 652 (452 876) (99 851) – –

Total segment revenue 606 470 529 979 619 260 359 796 183 310 78 652 (452 876) (99 851) 956 164 868 576

Interest revenue 1 294 224 1 659 1 838 707 10 249 (521) (9 369) 3 139 2 942 Interest expense (1 094) (2 064) (1 013) (633) (13 029) (14 312) 3 947 1 155 (11 189) (15 854)Depreciation (8 312) (6 852) (4 471) (7 887) (1 786) (541) – – (14 569) (15 280)Share of loss from associate – – – (2 406) – – – – – (2 406)Impairments 23 785 (10 138) 9 680 (16 775) – – – – 33 465 (26 913)

Profit/(loss) for the year 15 009 54 961 41 448 16 550 65 553 22 968 (98 433) (71 509) 23 577 22 970

Other information Capital expenditure 28 402 3 769 7 107 5 567 79 640 22 331 – – 115 149 31 667

The Group’s most significant customer accounts for R293 million (2012: R246 million) of the total revenue recognised in the current year and relates to the business support services segment.

Notes to the fi nancial statements (continued)



1. Segment report (continued)

Business Support Services ICT Solutions Corporate Eliminations Total

2013 R’000

2012 R’000

2013 R’000

2012 R’000

2013 R’000

2012 R’000

2013 R’000

2012 R’000

2013 R’000

2012 R’000

Statement of financial position Assets Segment assets 544 818 531 654 323 784 195 224 934 352 593 493 (1 120 709) (677 513) 682 245 642 858 Investment in associates – – – – – – – – – –

Consolidated total assets 544 818 531 654 323 784 195 224 934 352 593 493 (1 120 709) (677 513) 682 245 642 858

Liabilities – Segment liabilities 218 131 218 483 329 266 142 470 639 302 510 045 (771 015) (495 539) 415 684 375 459

Consolidated total liabilities 218 131 218 483 329 266 142 470 639 302 510 045 (771 015) (495 539) 415 684 375 459

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 1. Segment profit represents the profit earned by each segment.

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical allocation of the assets.

All assets are allocated to reportable segments. Goodwill, deferred tax and current tax receivable/payable are allocated to Group services. Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments; and all liabilities are allocated to reportable segments. Liabilities for which reportable segments are jointly liable are allocated in proportion to segment assets.

Rest of Africa South Africa Total

2013 R’000

2012 R’000

2013 R’000

2012 R’000

2013 R’000

2012 R’000

Geographical informationExternal revenue 36 444 43 135 919 720 825 441 956 164 868 576 Profit/(loss) for the year 1 004 4 377 22 573 18 593 23 577 22 970 Segment assets 21 032 21 032 661 213 621 826 682 245 642 858 Segment liabilities 15 899 11 594 399 785 363 865 415 684 375 459 Capital expenditure 935 2 078 114 214 29 589 115 149 31 667

The revenue from external parties and all other items of income, expenses, profits and losses reported in the segment report is measured in a manner consistent with that in the statement of comprehensive income.

Geographical informationThe Group operates in two main geographical areas:South Africa – the Group derives revenue from consulting, professional services and outsourcing services as well as from application, implementation and infrastructure services. All Group services are also included here.Rest of Africa – the Group derives revenue from consulting, professional services and outsourcing services.


Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

2. RevenueSale of goods 455 686 416 593 – – Rendering of services 500 478 451 983 47 883 46 165 Rental income – – 2 853 2 642

956 164 868 576 50 736 48 807

3. Operating profi t/(loss) before fi nance costsOperating profit for the year is stated after accounting for the following:Amortisation 39 265 8 227 – – Impairments (Note 4) 33 465 26 913 17 000 12 930 Depreciation 14 569 15 280 483 511 Consulting fees 13 932 15 662 5 520 7 642 Directors’ emoluments 15 633 14 465 – 1 044

– Non-Executive Directors’ fees 1 063 1 044 – 1 044 Executive Directors– Salaries 6 775 6 862 – – – Bonuses 5 946 4 925 – – – Allowances 1 849 1 634 – –

Foreign exchange (profit)/loss 1 714 (2 750) – – (Profit)/loss on disposal of property, plant and equipment (459) (188) – – Operating lease rentals 18 189 14 853 3 877 2 744

– Premises 16 816 14 218 3 877 2 522 – Equipment 1 373 635 – 222

Staff costs excluding directors emoluments 123 461 116 060 1 193 1 193

– Remuneration 117 361 112 686 – – – Provident fund contributions 4 907 2 181 – – – Equity settled share-based payments expense 1 193 1 193 1 193 1 193

4. ImpairmentsImpairment of goodwill 33 465 20 163 – – Impairment of investments in subsidiaries – – 17 000 12 930 Impairment of investment in associate – 6 750 – –

33 465 26 913 17 000 12 930

Impairment of goodwill and subsidiariesRefer to note 14 for the details relating to the impairment of goodwill recognised and note 17 for details of the impairment of investments in subsidiaries recognised in the current reporting period.




Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

5. Auditors’ remunerationAudit fees 2 237 2 067 1 750 1 500

Current year 2 137 1 967 1 750 1 500 Prior year under provision 100 100 – –

Other fees 320 437 230 –

2 557 2 504 1 980 1 500

6. Investment income Interest received – bank 3 139 2 942 422 118 Interest received – other – – 4 870 1 230 Dividends received from subsidiaries – – 20 440 8 061

3 139 2 942 25 732 9 409

7. Finance costsFinancial and vendor liabilities 9 378 13 465 9 539 9 599 Finance leases 1 403 1 962 – 36 Bank 408 427 – 53

11 189 15 854 9 539 9 688

8. Profi t on sale of businessSAB and T Business Innovations Group 6 985 – – –

6 985 – – –

9. Share of loss from associatesShare of profits/(losses):Knowledge Factory – (2 406) – –

– (2 406) – –

10. TaxationSouth African normal tax– Current year 42 301 31 322 – – – Secondary tax on companies – 1 830 – – – Capital gains tax 2 240 – – Foreign normal taxation– Current year 810 3 190 – – Deferred taxation– Temporary differences (note 20) (15 772) (12 887) 67 (2 566)

29 579 23 455 67 (2 566)

Reconciliation of rate of taxation % % % %

South African normal tax rate 28,00 28,00 28,00 28,00 Non-taxable income – – (54,77) (25,67) Non-deductible expenses 24,01 12,79 55,41 – Secondary tax on companies – 4,45 – – Loss on associate – 5,19 – – Profit on sale of business 0,15 – – – Differences in taxes for foreign operations 0,16 – – – Assessed losses not recognised 3,33 0,01 – –

Effective rate 55,65 50,44 0,64 2,33

Refer to note 20 for details on the assessed losses not recognised.


2013 R’000

2012 R’000

11. Earnings/(loss) per shareEarnings/(loss) per share (cents) 2,38 2,33 Diluted earnings/(loss) per share (cents) 2,38 1,85 Headline earnings per share (cents) 8,20 6,81 Diluted headline earnings per share (cents) 8,20 5,41

11.1 Earnings/(loss) and diluted earnings/(loss)Earnings/(loss) used in the calculation of basic and diluted earnings per share 11 643 12 194

11.2 Headline earningsHeadline earnings attributable to ordinary shareholders 40 032 35 597

Reconciliation between earnings and headline earnings:

Gross R’000

Tax R’000

Non-controlling

interest R’000

NetR’000

2013Profit attributable to ordinary shareholders 53 156 (29 579) (11 934) 11 643 Goodwill impairment 33 465 – – 33 465 Profit on sale of subsidiary (6 985) 2 240 – (4 745) Profit on disposal of property, plant and equipment (459) 128 – (331)

Headline earnings attributable to ordinary shareholders 79 177 (27 211) (11 934) 40 032

2012Profit attributable to ordinary shareholders 46 344 (23 374) (10 776) 12 194 Goodwill impairment 20 163 – – 20 163 Impairment on investment in associate 6 750 – (3 375) 3 375 Profit on disposal of property, plant and equipment (188) 53 – (135)

Headline earnings attributable to ordinary shareholders 73 069 (23 321) (14 151) 35 597

2013 Shares

’000

2012 Shares

’000

11.3 Weighted average number of shares and diluted weighted average number of sharesWeighted average number of shares 488 294 522 617 Diluted weighted average number of shares 488 294 657 617

Reconciliation between the number of shares used for earnings per share and diluted earnings per share: Number of shares used for earnings per share 488 294 522 617 BEECo and MANCo share scheme – 135 000

Number of shares used for diluted earnings per share 488 294 657 617




2013 R’000

2012 R’000

11. Earnings/(loss) per share (continued)11.4 Net asset value and net tangible asset value per share

Net asset value per share (cents) 38,10 35,11 Net tangible asset per share (cents) 12,80 1,47 Total shares in issue (‘000) 679 159 679 159 Treasury shares (76 648) (27 789)

Total shares in issue after treasury shares (‘000) 602 511 651 370

Available-for-sale

R’000

Loans and receivables

R’000

Financial liabilities at

amortised cost

R’000 Total R’000

12. Gains and losses per category of fi nancial instrumentsGroup – 2013Investment revenue – 3 139 – 3 139 Finance cost – – (11 189) (11 189)

– 3 139 (11 189) (8 050)

Group – 2012Investment revenue – 2 942 – 2 942 Finance cost – – (15 854) (15 854) Fair value adjustments – available-for-sale* (127) – – (127)

(62) 2 942 (15 854) (13 039)

Company – 2013Investment revenue – 25 732 – 25 732 Finance cost – – (9 539) (9 539)

– 25 732 (9 539) 16 193

Company – 2012Investment revenue – 9 409 – 9 409 Finance cost – – (9 688) (9 688) Fair value adjustments – available-for-sale* (127) – – (127)

(127) 9 409 (9 688) (406)

* The fair value adjustment is as a result of a recycled loss.


Cost 2013

R’000

Accumu-lated

depre-ciation

2013R’000

Carrying amount

2013R’000

Cost 2012

R’000

Accumu-lated

depre-ciation

2012R’000

Carrying amount

2013R’000

13. Property, plant and equipment GroupPlant and machinery 74 541 (32 369) 42 172 35 158 (25 885) 9 273 Under construction 84 865 – 84 865 21 703 – 21 703 Furniture and fittings 7 136 (4 256) 2 880 6 439 (3 608) 2 831 Motor vehicles 9 425 (6 179) 3 246 7 698 (4 157) 3 541 Office equipment 4 599 (3 963) 636 4 105 (3 060) 1 045 Computer equipment 34 094 (26 808) 7 286 28 269 (23 631) 4 638 Leasehold improvement 9 930 (7 280) 2 650 7 168 (6 033) 1 135 Study material 258 (258) – 258 (250) 8 Signage 181 (181) – 181 (101) 80

225 029 (81 294) 143 735 110 979 (66 725) 44 254

Reconciliation of property, plant and equipment

Opening balance

R’000

Additions through

business combi-nations R’000

Additions R’000

Disposals R’000

Depre-ciation R’000

Closing balance

R’000

Group2013Plant and machinery 9 273 – 39 951 (568) (6 484) 42 172 Under construction 21 703 – 63 162 – – 84 865 Furniture and fittings 2 831 77 878 (258) (648) 2 880 Motor vehicles 3 541 73 1 956 (302) (2 022) 3 246 Office equipment 1 045 116 586 (208) (903) 636 Computer equipment 4 638 534 5 958 (667) (3 177) 7 286 Leasehold improvement 1 135 104 2 658 – (1 247) 2 650 Study material 8 – – – (8) – Signage 80 – – – (80) –

44 254 904 115 149 (2 003) (14 569) 143 735

2012Plant and machinery 13 451 – 1 144 (1 618) (3 704) 9 273 Under construction – – 21 703 – – 21 703 Furniture and fittings 3 264 – 1 221 (663) (991) 2 831 Motor vehicles 4 008 – 2 165 (850) (1 782) 3 541 Office equipment 2 191 – 243 (953) (436) 1 045 Computer equipment 7 493 – 4 467 (1 080) (6 242) 4 638 Leasehold improvement 3 411 – 724 (925) (2 075) 1 135 Study material 45 – – (8) (29) 8 Signage 101 – – – (21) 80

33 964 – 31 667 (6 097) (15 280) 44 254




13. Property, plant and equipment (continued)Leased property, plant and equipmentThe Group leases various classes of property, plant and equipment under a number of finance leases. At 31 May 2013, the net carrying amount of leased property, plant and equipment that is secured under finance leases as follows:

Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

Plant and machinery 31 083 2 687 – – Motor vehicles 3 061 3 138 – –

34 144 5 825 – –

Property, plant and equipment under constructionDuring 2013, the Group continued construction of the new office building and costs incurred up to the reporting date totalled R67 765 248 plus R17 100 000 for the purchase of the land (2012: R4 602 738). The total cost to complete the construction is estimated to be R70 million excluding land.

A mortgage bond have been covered by Investec Bank Limited as described in note 28.

Capitalised borrowing costs relating to the acquisition of the new office building amount to R1 937 326 (2012: R1 216 209), with a capitalisation rate of 10,08% (2012: 10,08%).

Disposals amounting to R2 002 522 (2012: R6 097 025) were disposed during the normal course of business.

The segments affected for the above mentioned disposals are as follows:

Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

Business Support Services 1 626 4 521 – –ICT Solutions 377 1 576 – –

Total 2 003 6 097 – –

Cost 2013

R’000

Accumu-lated

depre-ciation

2013R’000

Carrying amount

2013R’000

Cost 2012

R’000

Accumu-lated

depre-ciation

2012R’000

Carrying amount

2013R’000

CompanyFurniture and fittings 750 (438) 312 693 (362) 331 Motor vehicle 138 (136) 2 138 (109) 29 Office equipment 58 (20) 38 20 (12) 8 Computer equipment 1 788 (1 150) 638 1 652 (799) 853 Leasehold improvement 128 (62) 66 128 (41) 87

2 862 (1 806) 1 056 2 631 (1 323) 1 308


13. Property, plant and equipment (continued)Reconciliation of property, plant and equipment

Opening balance

R’000 Additions

R’000 Disposals

R’000

Depre-ciation R’000

Closing balance

R’000

Company2013Furniture and fittings 331 57 – (76) 312 Motor vehicle 29 – – (27) 2 Office equipment 8 38 – (8) 38 Computer equipment 853 136 – (351) 638 Leasehold improvement 87 – – (21) 66

1 308 231 – (483) 1 056

2012Furniture and fittings 335 63 – (67) 331 Motor vehicle 64 – – (35) 29 Office equipment 6 7 – (5) 8 Computer equipment 761 475 – (383) 853 Leasehold improvement 108 – – (21) 87

1 274 545 – (511) 1 308

The estimation of the useful lives of property, plant and equipment is based on historic performance as well as expectations about future use and therefore requires a significant degree of judgement to be applied by management. These depreciation rates represent management’s current best estimate of the useful lives of the assets.

Cost 2013

R’000

Accumu-lated

depre-ciation

2013R’000

Carrying amount

2013R’000

Cost 2012

R’000

Accumu-lated

depre-ciation

2012R’000

Carrying amount

2013R’000

14. Goodwill Group Goodwill 465 943 (315 263) 150 680 459 865 (281 798) 178 067

465 943 (315 263) 150 680 459 865 (281 798) 178 067

Reconciliation of goodwill

Opening balance

R’000

Additions through


Disposals R’000

Impairment R’000

Closing balance

R’000

Group 2013 Goodwill 178 067 6 078 – (33 465) 150 680

178 067 6 078 – (33 465) 150 680

2012 Goodwill 198 230 – – (20 163) 178 067

198 230 – – (14 938) 178 067




14. Goodwill (continued)Goodwill is reviewed annually at each reporting date for impairment, or more frequently when there are indicators that impairment may have occurred, by comparing the carrying amount to its recoverable amount. Impairment losses are included in other operating expenses in profit or loss.

Key assumptions used in impairment testing for goodwill impaired in the current periodThe cash-generating capabilities of all CGU’s were determined by discounting the future cash flows generated from continuing operations.

The recoverable amount of each operation’s goodwill is based on value in use calculations. The calculations are based upon discounting expected pre-tax cash flows at a risk adjusted interest rate appropriate to the cash-generating unit, the determination of both of which requires the exercise of judgement. The estimation of pre-tax cash flows is sensitive to the periods for which forecasts are available and to assumptions regarding the long-term sustainable cash flows. While forecasts are compared with actual performance and external economic data, expected cash flows naturally reflect management’s view of future performance.

The cash flow projections were based on the approved budgeted 2014 results, growth for a further three years thereafter and a reasonable growth rate is applied thereafter based on current market conditions. In assessing future cash flows, management has considered the assumptions relating to the sustainable growth, market opportunities as well as changes to the cost structures based on business plans.

The discount rates used in the discounted cash flows models are calculated using the principles of the capital asset pricing model, taking into account the current market conditions.

A pre-tax weighted average cost-of-capital rate that ranges between 18,5% and 19,5% per annum was used in discounting the projected cash flows. Growth rates applied for the three-year period beyond the 2014 budget was 5% (2012: 5%). Perpetuity growth rates applied was 4,5% (2012: 4,5%). The growth rate does not exceed the long-term average growth rate for the markets in which the entity operates and is consistent with the long-term average of the industry.

The values assigned to the key assumptions represent management’s assessment of future trends in the industry and are based on both external sources and internal sources (historical data).

ImpairmentThe recoverable amount of the following cash-generating units were determined to be higher than the carrying amount and therefore no impairment charge emanated:• Red Edge Solutions Proprietary Limited;• Advocate Solutions Proprietary Limited;• R and S Consulting Proprietary Limited; and• Mint Management Technologies Proprietary Limited.

Goodwill impairment for the current year of R33 465 000 (31 May 2012: R20 163 000) reflects a write-down for the following subsidiaries:

Subsidiary R’000

– Intergraph Systems Southern Africa Proprietary Limited (9 680) – SAB and T Ubuntu Holdings Proprietary Limited (18 672) – Morvest Mithratech Proprietary Limited (5 113)

(33 465)

Impairment lossesGoodwill of R18 672 000 relating to SAB and T Ubuntu Holdings Proprietary Limited was fully impaired as a result of the sale of SAB and T Business Innovations Group Proprietary Limited. SAB and T Business Innovations Group Proprietary Limited was a 100% owned subsidiary of SAB and T Ubuntu Holdings Proprietary Limited. Refer to note 38 for the details of the disposal.

The carrying amounts of the Intergraph Systems Southern Africa and Morvest Mithratech units were determined to be higher than their recoverable amounts, based on value in use, and impairment losses of R9 680 000 and R5 113 000, respectively were recognised, which was fully allocated to goodwill.


14. Goodwill (continued)Goodwill allocationFor the purpose of impairment testing, goodwill is allocated to the Group’s subsidiaries or group of subsidiaries which are each considered to be a cash-generating unit and represent the lowest level within the Group at which the goodwill is monitored for internal management purposes.

A cash-generating unit (“CGU”) is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets.

Cost R’000

Accumu-lated

impairment R’000

Carrying value R’000

2013 The aggregate cost of goodwill allocated to each unit is as follows:Red Edge Solutions Proprietary Limited 65 121 – 65 121 Morvest Information Communication and Technology Proprietary Limited CGU 50 277 (29 273) 21 004

– Advocate Solutions Proprietary Limited 6 032 – 6 032 – Intergraph Systems Southern Africa Proprietary Limited 44 245 (29 273) 14 972

Morvest Mithratech Proprietary Limited 26 338 (5 113) 21 225 SAB and T Ubuntu Holdings Limited 78 417 (78 417) – Mint Management Technologies Proprietary Limited 20 056 (15 263) 4 793 R and S Consulting Proprietary Limited 32 459 – 32 459 iSolve Business Solutions Proprietary Limited 6 078 – 6 078 Other fully impaired CGU’s* 187 197 (187 197) –

465 943 (315 263) 150 680

2012The aggregate cost of goodwill allocated to each unit is as follows:Red Edge Solutions Proprietary Limited 65 121 – 65 121 Morvest Information Communication and Technology Proprietary Limited CGU 50 277 (19 593) 30 684

– Advocate Solutions Proprietary Limited 6 032 – 6 032 – Intergraph Systems Southern Africa Proprietary Limited 44 245 (19 593) 24 652

Morvest Mithratech Proprietary Limited 26 338 26 338 SAB and T Ubuntu Holdings Limited 78 417 (59 745) 18 672 Mint Management Technologies Proprietary Limited 20 056 (15 263) 4 793 R and S Consulting Proprietary Limited 32 459 – 32 459 Other fully impaired CGU’s* 187 197 (187 197) –

459 865 (281 798) 178 067

* The fully impaired CGU’s are: Foster-Melliar Proprietary Limited, MICT VAR Proprietary Limited, Cybernet Africa Logistics Proprietary Limited, Midrand Computer Repair Centre Proprietary Limited, Matomo Technologies Proprietary Limited, Morvest Human Capital Management Proprietary Limited, Premium Ideas South Africa Proprietary Limited, Mint Net Proprietary Limited.

Sensitivity analysisThe following CGU when performing the goodwill impairment test were particularly sensitive to changes in revenue as follows:

Morvest Mithratech

R’000

10% decrease in revenue 7 325




15. Business combinationsOn 1 March 2013, ITQ Business Solutions Proprietary Limited a 51% held subsidiary of the Group obtained control of iSolve Business Solutions Proprietary Ltd and SQLDB Technology Solutions Proprietary Ltd by acquiring 60 % of the shares and claims of the issued share capital for cash.

The company’s core business is the provision of business intelligence solutions, enterprise solutions, custom development solutions, data management solutions, hardware and licensing and learning solutions and services. The acquisition is consistent with the company’s growth strategy.

In the three months to 31 May 2013, iSolve and SQLDB contributed revenue of R21 982 613 and a loss of R1 495 447 to the Group’s results. If the acquisition had occurred on 1 June 2012, management estimates that iSolve and SQLDB would have contributed R85,5 million revenue and R1,5 million profit to the Group. In determining these amounts management has assumed that the fair value adjustments, determined provisionally, that arose on acquisition date would have been the same if the acquisition had occurred on 1 June 2012.

Provisional fair value of assets acquired and liabilities assumed:

iSolve Business Solutions

R’000

SQLDB Technology

Solutions R’000

Group provisional

fair value adjustments

R’000

Recognised values on acquisition

R’000

Property, plant and equipment 822 82 – 904 Trade and other receivables 10 735 2 163 – 12 898 Other financial assets 1 412 2 417 – 3 829 Cash and cash equivalents 8 601 4 256 – 12 857 Borrowings (757) (90) – (847)Other financial liability (5 301) (2 000) – (7 301)Trade and other payables (4 695) (2 078) – (6 773)

Net identifiable assets and liabilities 10 817 4 750 – 15 567

Non-controlling interest (6 227)Goodwill on acquisition 6 078

Total consideration 15 418

Contingent consideration (refer to note 27) 8 218 Consideration paid in cash 7 200 Total consideration 15 418 Consideration paid in cash (7 200)Cash acquired 12 857

Net cash inflow 5 657

The acquisition of the above subsidiaries are based on provisional fair values as the Group has not yet determined the fair values of the identifiable assets, liabilities and or contingent liabilities. The fair value of the subsidiaries will be accurately determined by the next anniversary date.

The provisional goodwill is mainly attributable to the skills and technical talent of iSolve’s work force, and the synergies expected to be achieved from integrating iSolve into the Group’s existing business.


Cost 2013

R’000

Accumu-lated

amorti-sation and

impairment 2013

R’000

Carrying amount

2013 R’000

Cost 2012

R’000

Accumu-lated

amortisation and

impairment2012

R’000

Carrying amount

2012R’000

16. Intangible assetsGroupCustomer contracts 98 638 (96 863) 1 775 98 638 (57 601) 41 037 Patents 14 (9) 5 14 (6) 8

98 652 (96 872) 1 780 98 652 (57 607) 41 045

Reconciliation of intangible asset

Opening balance

R’000

Additions through


Additions R’000

Disposals R’000

Amorti-sation R’000

Impair-ment R’000

Closing balance

R’000

Group2013Customer contracts 41 037 – – – (39 262) – 1 775 Patents 8 – – – (3) – 5

41 045 – – – (39 265) – 1 780

2012Customer contracts 49 262 – – – (8 225) – 41 037 Patents 10 – – – (2) – 8

49 272 – – – (8 227) – 41 045

The current remaining useful life of the intangible assets is estimated to be as follows:

2013 2012

The estimation of the useful lives of intangible assets is based on historic performance as well as expectations about future use and therefore requires a significant degree of judgement to be applied by management. These rates represent management’s best estimate of the useful lives of these assets.

Customer contracts 3 9 Patents 2 3

During the year the Group reviewed the expected life of the customer contracts. One of the major customers has amended its contract renewal process which has resulted in a expected useful lives of these intangible assets to decrease. The effects of these changes on actual and expected amortisation in current and future years, respectively, are as follows:

Current year

1 year – 5 years > 5 years

(Decrease)/increase in amortisation 31 037 (17 898) (13 139)




Nature of business

%ownership

2013

%ownership

2012

Company 2013

R’000

Company 2012

R’000

17. Investments in subsidiariesDirectly held by companyMorvest Shared Services Proprietary Limited Shared Services 100 100 1 1 Foster-Melliar Proprietary Limited IT Consulting 100 100 1 1 Morvest Human Capital Management Proprietary Limited IT Consulting 100 100 20 647 20 647 Morvest Professional Services Proprietary Limited IT Consulting 100 100 2 503 2 503 ITQ Business Solutions GroupProprietary Limited IT Consulting 50,01 50,01 47 019 47 019 Morvest Information Communication and Technology Limited IT Investment Company 100 100 88 203 88 203 Morvest Mithratech Proprietary Limited

IT Manufacturing, sales and distribution 100 100 12 800 18 000

Premium Ideas South Africa Proprietary Limited Manufacturing

100 100

100 100 104 427 104 427

SAB and T Ubuntu Holdings Limited IT Consulting 100 100 53 742 65 542 Mint Management Technologies Proprietary Limited IT Consulting 50,01 50,01 14 669 14 669 R and S Consulting Proprietary Limited IT Consulting 50,01 50,01 51 254 51 254

395 266 412 266

Investment in subsidiaries reconciliationGross 610 727 610 727 Impairment (215 461) (302 158)Reversal of impairment – 103 697

Net 395 266 412 266

Impairment of investment in subsidiariesDuring the annual impairment test for goodwill, the recoverable amounts of the CGUs mentioned in note 14 as calculated in the goodwill impairment test was lower than the carrying amount. The above test is therefore an indication of impairment, which resulted in an impairment of R17 000 000 being recognised for the investment in subsidiaries.

Investment in subsidiaries impairment for the current year of R17 000 000 (31 May 2012: R12 930 000) reflects a write-down for the following subsidiaries:

R’000

Subsidiary– Morvest Mithratech Proprietary Limited 4 250 – Intergraph Systems Southern Africa Proprietary Limited 950 – SAB and T Ubuntu Holdings Limited 11 800

17 000


17. Investments in subsidiaries (continued)The segments affected for the above mentioned impairment are as follows:

Company

2013 R’000

2012 R’000

ICT Solutions 950 2,688 Business Support Services 16 050 10 242

17 000 12 930

Morvest Information Communication and Technology Limited and SAB and T Ubuntu Holdings Limited are unlisted public companies.

18. Investment in associatesThe Group had the following effective percentage interests in associates:

Nature of business

% ownership

2013

% ownership

2012

Group 2013

R’000

Group 2012

R’000

Platinum Page Proprietary Limited Concierge 40 – * * The Data Factory Proprietary Limited Outsourcing 36,7 36,7 * * Knowledge Factory Proprietary Limited Outsourcing 35 35 * *

* *

* Amount less than R1 000.

Summary of actual financial information of associates as at 31 May 2013:

Platinum Page

R’000

Knowledge Factory R’000

Data Factory R’000

Non-current assets 30 18 765 2 553 Current assets 254 23 904 2 363 Non-current liabilities – 10 096 (2 714)Current liabilities (1 143) 12 410 (3 349)Equity (859) (20 163) (1 146)Loss after tax (903) (2 561) (578)Revenue 220 21 589 8 508

Platinum Page Proprietary LimitedPlatinum Page is a newly incorporated business and only started trading in the current financial year.

A Group has not recognised losses relating to the above associates, totalling R1 517 000 in 2013 (2012: R46 722), since the Group has no obligation in respect of these losses.




Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

19. Other fi nancial assets Loans receivablePreference shares – Pavati – – 20 091 17 212 Preference shares – Calaska – – 3 597 3 037 Loan receivable sale of BIG (note 38) 2 710 – – – Other loans and receivables* 2 824 836 – –

5 534 836 23 688 20 249 Impairments – – – –

5 534 836 23 688 20 249

* Other loans and receivables consist of a number of smaller loans to unrelated third parties.

Non-currentLoans receivable – – 23 688 20 249

– – 23 688 20 249

CurrentLoans receivable 5 534 836 – –

5 534 836 – –

5 534 836 23 688 20 249

Loan receivable sale of BIG (note 38)The loan is unsecured, interest free and is payable by 30 November 2013 in terms of the sale agreement.

Other loans to associates and loans receivable (current)The above loans are unsecured, interest free and have no fixed terms of repayment.

Preference sharesThe preference dividends relate to the BEECo and MANCo share-based arrangement disclosed in note 35. The preference dividends are calculated based on a variable coupon rate equal to 75% of the prevailing the prime interest rate in respect of BEECo share option scheme and 80% of the prime interest rate in respect of MANCo share option scheme. The redemption date of the preference shares will be on the fifth anniversary of the subscription date for BEECo and on the seventh anniversary of the subscription date for MANCo.

Loans and receivables past due but not impairedLoans and receivables which are less than 12 months past due are not impaired. At 31 May 2013, Rnil (2012: R836 000) were past due but not impaired. The ageing of amounts past due but not impaired is as follows:

Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

More than 12 months past due – 836 – – Less than 12 months past due 5 534 – – –

5 534 836 – –

Loans and receivables impairedThe credit quality of loans receivables is considered to be good.


19. Other fi nancial assets (continued)Preference dividends past due but not impairedPreference dividends which are less than 12 months past due are not impaired. At 31 May 2013, Rnil (2012: Rnil) were past due but not impaired. The ageing of amounts past due but not impaired is as follows:

Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

More than 12 months past due – – 1 799 –Less than 12 months past due – – 1 908 1 799

– – 3 707 1 799

Fair values of financial assetsThe above financial assets are measured at amortised cost using the effective interest rate method. The directors consider that the carrying amounts of financial assets recorded at amortised cost in the financial statements approximate their fair values.

Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

20. Deferred taxationRepresented by:Accelerated allowances (5 345) (3 897) (129) (64)Intangible assets (498) (11 439) – – Provision for doubtful debts 9 954 12 875 – – Provision for obsolete stock 1 405 1 166 – – Leave pay 3 059 3 586 – – Bonus 6 273 7 387 2 635 2 635 Deferred income 18 505 2 192 – – Share-based payment – 529 – – Operating lease accrual 234 188 – – Assessed loss 17 675 23 892 12 029 12 029

51 262 36 479 14 535 14 601

Represented by:Deferred tax asset 57 105 51 815 14 535 14 601 Deferred tax liability (5 843) (15 336) – –

51 262 36 479 14 535 14 601

Opening balance (36 479) (23 592) (14 601) (12 034)Deferred tax disposed 989 – – –

Deferred taxation temporary differences (note 10) 15 772 12 887 (67) 2 566

The Group and company consider it probable that sufficient taxable income will be available in the future to realise the deferred tax asset raised based on future income to be generated. The sufficiency of future taxable income was supported by budgets for the 2014 financial year as well as the historical trading results of the various subsidiaries within the Group as well as the historical trading results of the company.

The amount of deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax asset is recognised on the statement of financial position is R8 294 011 (2012: R6 524 422).




Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

21. InventoriesRaw materials 17 554 55 545 – – Work in progress 7 843 1 845 – – Finished goods 9 446 9 312 – – Merchandise 629 10 – –

35 472 66 712 – – Inventory write downs (5 017) (1 663) – –

30 455 65 049 – –

The cost of inventories recognised as an expense during the period was R175 763 761 (2012: R150 095 172).

The cost of inventories recognised as an expense includes R3 378 879 (2012: R1 662 283) in respect of provision for write-downs of inventory to net realisable value.

An allowance is made to write stock down to the lower of cost or net realisable value. Management have made estimates of the selling price and direct cost to sell on certain inventory items. The write down is included in cost of sales.

Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

22. Trade and other receivablesFinancial instrumentsTrade receivables 168 803 163 385 22 438 27 851 Deposits 4 499 2 300 1 066 120 Other receivables 10 428 10 475 4 855 2 947 Allowance for impairment (47 400) (47 621) – –

136 330 128 539 28 359 30 918

Non-financial instrumentsPrepayments 44 182 9 672 – – VAT 13 976 8 100 5 882 5 999

58 158 17 772 5 882 5 999

Trade and other receivables 194 488 146 311 34 241 36 917

The carrying amount of trade and other receivables are denominated in the following currencies:Rand 127 336 119 462 28 359 30 918 US Dollar 215 762 – – Nigerian Naira 7 195 7 384 – – Chinese Yen – 636 – – Mozambican Metical 1 584 295 – –

136 330 128 539 28 359 30 918

CurrenciesTrade receivables have been ceded to Investec Bank Limited to obtain the long-term financing as described in note 28.

Fair value of trade and other receivablesThe directors estimate the carrying amount of trade and other receivables approximate their fair value.

Trade receivables disclosed above are classified as loans and receivables and are therefore measured at amortised cost.

The average credit period on sales of goods/services rendered is 60 days. No interest is charged on the trade receivables for the first 60 days from the date of the invoice. Thereafter, interest is charged at 2% per annum on the outstanding balance.


22. Trade and other receivables (continued)Trade receivables disclosed above include amounts (see below for aged analysis) that are past due at the end of the reporting period but against which the Group has not recognised an allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still considered recoverable.

The Group assesses its trade and loans receivables for impairment at each reporting date. In determining whether an impairment loss should be recorded in profit or loss, the Group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.

The impairment for trade and loans receivable is calculated on a specific basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date.

Exposure to credit riskThe carrying amount of trade and other receivables represents the maximum credit exposure.

The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:

Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

Domestic 185 709 138 632 34 241 36 917 Nigeria 7 195 7 384 – – Mozambique 1 584 295 – –

194 488 146 311 34 241 36 917

The Group’s most significant customer accounts for 32% of the trade receivables carrying amount at 31 May 2013 (2012: 28%).

Credit qualityThe following represents information on the credit quality of trade receivables that are neither past due nor impaired:A 90% 90% 90% 90%B 10% 10% 10% 10%

A – The debtors are of good credit quality and no default in payment is expected.B – These debtors usually pay, but have previously paid late and therefore there is a possibility that these debtors will

not be recoverable.

Please refer to note 40 for detailed information regarding the credit risk of trade and other receivables.

Trade and other receivables past due but not impairedTrade and other receivables amounting to R11 361 950 (2012: R8 891 129) which are less than three months past due are not considered to be impaired. The ageing of amounts past due but not impaired is as follows:

Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

1 month past due 8 379 609 196 3 712 2 months past due 872 823 197 1 310 3 months past due 2 111 7 459 6 150 5 840

Trade and other receivables impairedTrade and other receivables of R47 399 824 (2012: R47 620 718) were impaired and allowed for. The ageing of these balances is as follows:3 to 6 months – – – – Over 6 months 47 400 47 621 – –




Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

22. Trade and other receivables (continued)Reconciliation of allowance for impairment of trade and other receivablesOpening balance 47 621 35 901 Provision for impairment – 11 720 Unused amounts reversed (221) –

47 400 47 621

The allowance for impairment is based on past experience and the prevailing trading conditions relating to specific reportable segments and individual debtors, where risk of non-payment is perceived to be high and where outstanding balances are dated.

Company

2013 R’000

2012 R’000

23. Loans to/(from) Group companiesSubsidiariesAdvocate Solutions Proprietary Limited 915 915 Brainbridge Technologies Proprietary Limited 30 – Morvest Outsourcing Solutions Proprietary Limited (27 305) (25 516)Morvest Properties Proprietary Limited 75 281 24 579 Morvest Facilities Management Proprietary Limited 37 – Foster Melliar Proprietary Limited 385 – Midrand Computer Repair Centre Proprietary Limited 10 999 10 999 Intergraph Systems Southern Africa Proprietary Limited (67 831) (33 053)Red Edge Solutions Proprietary Limited (202) (506)Matomo Technologies Proprietary Limited 448 – Morvest Information Communication and Technology Proprietary Limited 35 154 15 715 Mint Net Proprietary Limited 889 106 Morvest Mithratech Proprietary Limited 19 367 359 Morvest Professional Services Proprietary Limited (4 360) (6 792)Morvest Investment Properties Proprietary Limited 2 382 – Morvest Human Capital Management Proprietary Limited (12 943) (5 573)Morvest Travel Proprietary Limited 70 – Xantium IT Services Proprietary Limited 12 797 12 707 Morvest Shared Services Proprietary Limited 21 401 5 355 Platinum Page Proprietary Limited 17 – Premium Ideas South Africa Proprietary Limited (232 697) (164 429)SAB and T Ubuntu Holdings Limited (31 432) (22 444)SAB and T Business Innovations Group Proprietary Limited – (17 340)Swop and Shop Proprietary Limited 16 – Morvest Retail Proprietary Limited* (1 284) 170

(197 866) (204 748)Impairments (23 678) (23 677)

(221 544) (228 425)

Current assets 156 764 58 821 Current liabilities (378 308) (287 246)

(221 544) (228 425)

The above loans are unsecured, interest free with no fixed terms of repayment.


Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

24. Cash and cash equivalentsBank and cash balances 83 131 103 732 5 697 1 662

83 131 103 732 5 697 1 662

Cash and cash equivalents has been ceded to Investec Bank Limited to secure long-term financing as described in note 28.

The carrying amount of cash and cash equivalents represents the maximum credit exposure.

25. Share capitalAuthorised1 500 000 000 ordinary shares of R0,0001 each 150 150 150 150

Issued679 158 612 (2012: 679 158 612) ordinary shares of R0,0001 each 51 52 68 68 Share premium 287 384 296 356 323 850 323 850

287 435 296 408 323 918 323 918

Reconciliation of number of shares issued:Reported as at 1 June 2012 516 369 528 405 679 159 679 159 Issue of ordinary shares – – – – Treasury shares issued for share scheme – – – – Shares utilised for Group share scheme – – – – Share repurchase (48 858) (12 036) – –

467 511 516 369 679 159 679 159

The unissued shares are under the control of the directors until the forthcoming annual general meeting.

Treasury shares held by GroupThe total number of shares held by the Group is 76 647 257 (2012: 27 788 436).

Subsequent to year-end a total of 21 329 734 number of shares acquired through the share repurchase programme have been cancelled from issued share capital.

26. Foreign currency translation reserveTranslation reserve comprises exchange differences on consolidation of foreign subsidiaries.Opening balance (12 154) (13 021) – – Exchange differences arising on translating foreign operations 2 087 867 – –

Closing balance (10 067) (12 154) – –

27. Amounts due to vendorsSellers of R and S Consulting 14 114 22 170 14 114 22 170 Sellers of iSolve and SQLDB 8 317 – – – Less: current portion (17 714) (8 056) (14 114) (8 056)

Non-current portion 4 717 14 114 – 14 114




1st year R’000

1st to 2nd year

R’000

2nd to 3rd year

R’000 Total

R’000

27. Amounts due to vendors (continued)Minimum contingent payments 17 714 4 717 – 22 431 Finance costs 3 886 683 – 4 569

Total contingent consideration 21 600 5 400 – 27 000

Total contingent consideration has been discounted using the risk-free rate. The risk-free rate was based on the South African long-term government bond rate in effect at the time of the acquisition.

Sellers of iSolve and SQLDBAn initial payment of R7,2 million was made on the effective transaction date. The remaining balance as at reporting date is payable based upon the achievement of annual PAT targets over a two year period. The Group estimates that the outcomes of the PAT targets over the two year period to be fully achievable.

Seller of R and S ConsultingThe remaining balance as at reporting date is payable based upon the achievement of a PAT target for the next financial year. The Group estimates that the outcome of the PAT target over the next year to be fully achievable.

Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

28. Other fi nancial liabilitiesInvestec Bank Limited – R86 million 64 765 79 628 64 765 79 628 Investec Bank Limited – R15 million 14 755 Other interest-bearing liabilities – 707 – – Nedbank Limited – Medium-term loan – 486 – –

79 520 80 821 64 765 79 628

Interest-bearing liabilities 79 520 80 821 64 765 79 628 Non-interest-bearing liabilities 5 363 1 173 – –

Total amount outstanding 84 883 81 994 64 765 79 628 Less: Amount included in current liabilities (27 892) (16 509) (22 528) (14 708)

Long-term portion outstanding 56 991 65 485 42 237 64 920

Investec Bank Limited – R86 million The loan bears interest at JIBAR +4,5% and is repayable in quarterly instalments of R5 632 057 commencing on 3 November 2011.

Investec Bank Limited – R15 million On 1 January 2013, Morvest drew it’s additional facility of R15 000 000. Initially only interest is payable monthly at prime +1 for the first 18 months, thereafter the loan bears interest at 3MJIBAR +4,5% and 50% of the capital and interest is repayable in quarterly instalments of R743 734. The residual of the loan including interest will be payable at the expiry of the loan.

The following security has been provided for the above Investec loans:– cession of trade receivable for Group entities;*– cession of all banks accounts for Group entities;*– cession of all insurance policies for Group entities;*– general notarial bond over movable property of Morvest Mithratech Proprietary Limited amounting to R70 million;– general notarial bond over movable property of Morvest Outsourcing Solutions Proprietary Limited amounting

to R70 million;– mortgage bond over property of Morvest Properties Proprietary Limited over Noordwyk Ext 94 for an amount of

R63 million;– guarantees by Group entities* for punctual payment of all amounts due to Investec; and– subordination of any shareholders loans and claims.


28. Other fi nancial liabilities (continued)Other non-interest-bearing financial liabilitiesThe above balance is made up of a number of smaller loans and are unsecured, interest free and have an unconditional right to defer settlement to periods after 31 May 2014.

Fair values of financial liabilitiesFinancial liabilities are measured at amortised cost using the effective interest rate method. The directors consider that the carrying amounts of financial liabilities recorded at amortised cost in the financial statements approximate their fair values.

The Group’s borrowing powers are unlimited and the Group has not exceeded the borrowing powers in terms of the articles of association of the holding company and of the underlying subsidiaries.

* The Group entities for which this security applies to include: Foster – Melliar Proprietary Limited, Intergraph System Southern Africa Proprietary Limited, Cybernet Africa Logistics Proprietary Limited trading as Morvest Properties Proprietary Limited, Premium Ideas South Africa, Red Edge Solutions Proprietary Limited, Morvest Human Capital Management Proprietary Limited, Applebox Franchising Proprietary Limited, Morvest Outsourcing Solutions, Morvest Professional Services Proprietary Limited and Morvest Mithratech Proprietary Limited.

Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

29. Finance lease obligationsTotal finance lease outstanding 28 325 9 518 – – Less: Amount included in current liabilities (8 735) (3 774) – 21

Long-term portion outstanding 19 590 5 744 – 21

Reconciliation between the total minimum lease payments and their present value

Up to 1 year

2 to 5 years

More than 5 years Total

Group2013Minimum lease payments 10 394 21 472 – 31 866 Finance cost (1 659) (1 882) – (3 541)

Present value 8 735 19 590 – 28 325

2012Minimum lease payments 4 735 7 046 – 11 781 Finance cost (961) (1 302) – (2 263)

Present value 3 774 5 744 – 9 518

The finance lease agreements are repayable in 60 monthly instalments and bear interest at prime +1% to prime +2%.

The Group’s obligations under finance lease arrangements are secured by the lessor’s charge over the financed fixed assets as disclosed in note 13.




Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

30. Trade and other payablesFinancial instrumentsTrade payables 98 901 161 207 13 515 1 056 Other payables 8 081 14 665 339 195

106 982 175 872 13 854 1 251

Non-financial instruments Bonus 22 405 21 025 9 410 9 410 Leave pay 10 925 7 985 – – VAT 9 331 4 338 – – Payroll accruals 13 638 4 066 – – Deferred income 70 940 9 754 – – Other accruals 9 858 9 126 53 53

137 097 56 294 9 463 9 463

Trade and other payables 244 079 232 166 23 317 10 714

CurrenciesThe carrying amount of trade and other payables are denominated in the following currencies:Rand 101 024 165 024 13 854 1 251US Dollar 2 805 6 724 – – British Pound – 126 – – European Euro 135 766 – – Nigerian Naira 2 877 3 105 – – Mozambican Metical 141 127 – –

106 982 175 872 13 854 1 251

Fair value of trade and other payablesThe average credit period on purchases of goods and services is 60 days. No interest is charged on the trade payables for the first 60 days from the date of the invoice. Thereafter, interest is charged at 2% per annum on the outstanding balance.

Due to the short-term nature of the Group’s trade and other payables, the carrying value approximates their fair value. Trade payables are subject to normal industry settlement terms.

Deferred incomeAt 31 May 2013 the Group has deferred income of R70 940 000 (2012: R9 754 000), which represents the consideration received in respect of goods and services not yet delivered and performed.

Opening balance

R’000Additions

R’000

Reversed during

the year R’000

Total R’000

31. ProvisionsReconciliation of provisions – Group 2013Legal claims 250 – (70) 180

Reconciliations of provision – Group 2012Legal claims 3 786 – (3 536) 250

Intergraph Systems Southern Africa is involved in litigation by a former reseller arising from the cancellation of the reseller agreement and is seeking damages of R5 400 000. The probable loss has been estimated at R150 000 and legal costs incurred to date amount to R1 106 600. The directors are of the opinion that the claim can be successfully resisted by the company.


31. Provisions (continued)Morvest Professional Services Proprietary Limited is involved in litigation with George Varden who is seeking damages of R1 329 000 resulting out of retrenchment for operational reasons. The probable loss has been estimated at R30 000 and legal costs incurred to date amount to R255 000. The directors are of the opinion the claim can be successfully resisted by the company.

All other legal proceedings as disclosed in the prior year have been satisfactorily resolved in the current year.

32. Contingent liabilities

A supplier instituted a claim against Morvest Mithratech for R754 787 in respect of payment of outstanding invoices arising from the supply of goods to Morvest Mithratech. The possible loss has been estimated at R500 000.

All other legal proceedings as disclosed in the prior year have been satisfactorily resolved in the current year.

Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

33. CommitmentsGroupThe following operating lease charges are payable on equipment and premises:– Due within one year 9 457 12 787 – – – Due within one to five years 12 459 9 871 – –

21 916 22 658 – –

CompanyThe following rentals on operating leases are receivable on premises:– Due within one year – – 768 3 737 – Due within one to five years – – – 1 699

– – 768 5 436

Operating lease payments by the Group represent rentals payable by the subsidiaries for certain of its office properties and equipment. All leases are negotiated for an average term of five years and rentals are fixed for an average of three years. No contingent rent is payable.

Available-for-sale

R’000


R’000

Financial liabilities at

amortised cost

R’000Total

R’000

34. Financial instruments by categoryGroup – 2013Financial assetsCash and cash equivalents – 83 131 – 83 131 Trade and other receivables – 136 330 – 136 330 Other financial assets – 5 534 – 5 534

Total financial assets – 224 995 – 224 995

Financial liabilitiesTrade and other payables – – 106 982 106 982 Other financial liabilities – – 84 883 84 883 Finance lease obligation – – 28 325 28 325 Vendor liabilities – – 14 114 14 114

Total financial liabilities – – 234 304 234 304




Available-for-sale

R’000


R’000

Financial liabilities at amortised

cost R’000

Total R’000

34. Financial instruments by category (continued)Group – 2012Financial assetsCash and cash equivalents – 103 732 – 103 732 Trade and other receivables – 128 539 – 128 539 Other financial assets – 836 – 836


Financial liabilitiesTrade and other payables – – 175 872 175 872 Other financial liabilities – – 81 994 81 994 Finance lease obligation – – 9 518 9 518 Vendor liabilities – – 22 170 22 170

Total financial liabilities – – 289 554 289 554

Company – 2013Financial assetsCash and cash equivalents – 5 697 – 5 697 Trade and other receivables – 28 359 – 28 359 Loans to Group companies – 156 764 – 156 764 Other financial assets – 23 688 – 23 688


Financial liabilitiesTrade and other payables – 13 854 – 13 854 Loans from Group companies – 378 308 – 378 308 Finance lease obligation – – – – Other financial liabilities – 64 765 – 64 765

Total financial liabilities – 456 927 – 456 927

Company – 2012Financial assetsCash and cash equivalents – 1 662 – 1 662 Trade and other receivables – 30 918 – 30 918 Loans to Group companies – 58 821 – 58 821 Other financial assets – 20 249 – 20 249


Financial liabilitiesTrade and other payables – 1 251 – 1 251 Loans from Group companies – 287 246 – 287 246 Finance lease obligation – 21 – 21 Other financial liabilities – 79 628 – 79 628

Total financial liabilities – 368 146 – 368 146


35. Share-based paymentsDuring the year the following share-based payment expenses were recognised in profit or loss regarding share-based payment arrangements that existed:

Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

Equity-settledMorvest BEECo 1 001 1 001 1 001 1 001 Morvest MANCo 192 192 192 192

1 193 1 193 1 193 696

Morvest BEECoThe BEECo share scheme participants acquired a shelf company which in turn acquired 57,9 million Morvest ordinary shares, which formed part of the treasury shares before the transaction. BEECo further subscribed for 56,9 million new ordinary shares by means of a fresh issue of shares by Morvest. BEECo Participants will, via BEECo, beneficially own 17% of the issued ordinary share capital of Morvest.

Morvest facilitated the transaction by providing funding of R18,3 million to BEECo. This was achieved by Morvest subscribing to cumulative redeemable preference shares in BEECo.

The repayment of the preference shares shall be funded by BEECo out of dividends and other distributions received on the Morvest share.

The redemption date of the preference shares shall be on the fifth anniversary of the grant date.

The fair value of the equity-settled share-based payment expense is calculated at grant date and expensed over the vesting period of the share options.

The BEECo share scheme participants have pledged 45 642 028 Morvest shares personally held by the BEE participants amounting to 40% of the BEECo subscription amount, and issued an unsecured financial guarantee to the value of 10% of the BEECo preference share subscription amount.

Morvest MANCoThe MANCo share scheme participants acquired a shelf company which in turn subscribed for 20,2 million new ordinary shares by means of a fresh issue of shares by Morvest. MANCo will beneficially own 3% of the issued ordinary share capital of Morvest.

Morvest facilitated the transaction by providing funding of R3,2 million to MANCo. This was achieved by Morvest subscribing to cumulative redeemable preference shares in MANCo.

The repayment of the preference shares shall be funded by MANCo out of dividends and other distributions received on the Morvest shared.

The redemption date of the preference shares shall be on the seventh anniversary of the grant date.

The fair value of the equity-settled share-based payment expense is calculated at grant date and expensed over the vesting period of the share options.

BEECo share scheme

2013 ‘000

MANCo share scheme

2013 ‘000

Grant date 11 October 2010 11 October 2010Expiry date 10 October 2015 10 October 2017Number of share options granted 114 750 20 250 Options vesting period 5 years 7 yearsVesting condition Remain in service Remain in serviceFair value at grant date (cents) 4,4 6,6Average remaining contractual life (years) 2,3 4,4




35. Share-based payments (continued)Details of outstanding options for the year are as follows:

Number of options

2013

Weighted average exercise

price 2013

R

Number of options

2012

Weighted average exercise

price 2012

R

BEECo and MANCo share schemeOutstanding at the beginning of the year 135 000 0,24 135 000 0,24 Granted – – – – Forfeited – – – – Exercised – – – –

Outstanding at the end of the year* 135 000 0,24 135 000 0,24

Exercisable at the end of the year – – – –

* The range of exercise prices is between 23 and 27 cents.

The share-based payment expense was calculated using an option-pricing model reflective of the underlying characteristics of each part of the transaction. It is calculated using the following assumptions at grant date.

BEECo**share

scheme 2013

MANCo share

scheme 2013

Valuation model Binomial option-

pricing model Binomial option-

pricing model Weighted average share price (cents) 16 16 Exercise price (cents) 23 27 Risk-free interest rate 7,6% 7,6%Expected volatility 40% 40%Expected dividend yield – –Vesting period 5 7

** BEECo participants have issued the guarantee to the value of 10% of the BEECo preference share subscription amount and have pledged 45 642 028 shares personally held by the BEECo Participants (i.e. 40% of the BEECo preference share subscription amount, including 2 million notional shares). These pledges and guarantees have been valued using the binomial put option pricing model and have been included in the calculation to determine the fair value of the options.

The risk-free rate for periods within the contractual term of the share rights was based on the South African long-term government bond rate in effect at the time of the grant.

The expected volatility in the value of the share rights granted was determined using the historical normalised volatility of the Morvest share price.

A dividend yield of 0,0% was determined as no discrete dividends were forecast for the foreseeable future at grant date.

The valuation of the share-based payment expense requires a significant degree of judgement to be applied by management.


Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

36. Cash generated by operationsProfit before taxation 53 156 46 344 10 449 110 182 Adjustments for non-cash items:– Depreciation 14 569 15 280 483 511 – Amortisation 39 265 8 227 – – – Impairment of goodwill 33 465 20 163 – – – Write off of loans to Group companies – – – (10 634) – Impairment loss reversal in subsidiaries – – – (103 697) – Impairment of investment in subsidiaries – – 17 000 12 930 – Impairment of associate – 6 750 – – – Investment income (3 139) (2 942) (5 292) (9 409) – Finance costs 11 189 15 854 9 539 9 599 – Profit on sale of subsidiary (6 985) – – – – Dividend received – – (12 765) – Unrealised loss on foreign exchange 1 714 (2 750) – – – Recycling of available-for-sale reserve – (107) – (107) – (Profit) on disposal of fixed assets (459) (188) – – – Foreign currency translation movement 2 087 867 – – – Operating lease accruals 166 (223) (310) – – Share-based payment expense 1 193 1 193 1 193 1 193 – Movement in provisions (70) (3 536) – – – Loss from associate – 2 406 – –

Operating income/(loss) before changes in working capital 146 151 107 338 20 297 10 568 – Inventories 30 370 (45 349) – – – Trade and other receivables (46 724) (14 151) (2 114) 12 667 – Trade and other payables 8 736 88 296 14 262 (16 568)

138 533 136 134 32 445 6 667

37. Taxation paidBalance at the beginning of the year 1 604 4 101 – – Taxation charge as per statement of comprehensive income 29 579 23 374 – – Deferred taxation 15 772 12 887 – – Taxation liability assumed on acquisition – – – – Taxation liability reduced on disposal of business – – – – Balance at the end of the year (13 769) (1 604) – –

33 186 38 758 – –

38. Disposal of businessesProperty, plant and equipment 904 – – – Deferred taxation 989 – – – Financial assets 163 – – – Inventory 4 224 – – – Trade and other receivables 11 190 – – – Trade and other payables (4 455) – – –

Total net assets disposed 13 015 – – – Profit on sale of business 6 985 – – –

Total consideration 20 000 – – – Consideration receivable (note 19) (2 710) – – Cash received to 31 May 2013 (17 290) – – –

Net cash inflow 17 290 – – –




38. Disposal of businesses (continued)On 1 November 2012, the Group disposed of the shares and claims in SAB and T Business Innovation Group Proprietary Limited (BIG), which formed part of the Group’s Business Support Services reportable segment, for R20 million.

In terms of the agreement the sold shares and claims exclude the following:– the Kha Ri Gude Mass Literacy Project (KRG Project); and– the outsourcing contract between the company and the Department of Agriculture, Forestry and Fisheries relating to

the supervision of quota compliance by fish quota owners and ancillary services and any extension or expansion thereof (DAFF Contract).

BIG’s core business is providing internal audit and certain consulting services to the public and private sector. Based on the Group’s long-term strategy, management has proceeded with the sale of the internal audit and part of the consulting division, whilst retaining the strategic outsourcing and consulting divisions which continue to present good growth opportunities.

39. Related partiesRelationshipsSubsidiaries Refer to note 17 and 19 Associates Refer to note 18

Key senior managementThe directors are defined as key senior management. Details of the directors’ emoluments, shareholding and share options are disclosed in note 41.

During the year, certain related parties in the ordinary course of business, entered into various loans and transactions with the Group under arm’s length terms no less favourable than those arranged with third parties.

Transactions with key senior managementGifts and Flowers Emporium Proprietary Limited (formerly D and S Interiors and Gifting Proprietary Limited)Suren Singh’s spouse is shareholder and director of the above company that provides corporate gifting and interior services to the company. For the current year an amount of R252 415 (2012: R163 786) for these services was incurred by the Group.

Morvest Retail Proprietary LimitedMS Varachia is a director and shareholder of the above Group company. At the end of the current year, a shareholder loan amounting to R2 930 308 was owed to him by the company. There were no other transactions other than the shareholder loan between MS Varachia and Morvest Retail.

Morvest Mithratech Proprietary LimitedF Varachia is the managing director of Morvest Mithratech and he is a family member of MS Varachia. F Varachia earns a total cost to company salary of R1 210 641 for his services as managing director of Morvest Mithratech.

Inter-company transactionsTransactions between the company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note.

CompanyRelated party balances and transactionsDetails on loan accounts owing (to)/by related parties are set out in note 23 of the financial statements.


2013 R’000

2012 R’000

39. Related parties (continued)Amounts included in trade receivables relating to related partiesApplebox Franchising Proprietary Limited – 88 Foster Melliar Proprietary Limited 2 716 2 253 Intergraph Systems Southern Africa Proprietary Limited 471 304 ITQ Business Solutions Proprietary Limited 7 6 Mint Management Technologies Proprietary Limited 172 – Mint Net Proprietary Limited – 255 Morvest Mithratech Proprietary Limited 495 512 Premium Ideas South Africa Proprietary Limited 2 503 1 224 Red Edge Solutions Proprietary Limited 10 2 318 SAB and T Business Innovations Group Proprietary Limited – 174 SAB and T Ubuntu Holdings Limited 318 – Swop and Shop Proprietary Limited 35 – Morvest Retail Proprietary Limited 189 – Morvest Professional Services Proprietary Limited 2 414 – Morvest Human Capital Management Proprietary Limited 1 225 1 215 Morvest Outsourcing Solutions Proprietary Limited 8 825 10 996 Morvest Shared Services Proprietary Limited – 2 414 R and S Consulting Proprietary Limited – 6 037

Amounts included in trade payables relating to related partiesIntergraph Systems Southern Africa Proprietary Limited 26 7 Mint Management Technologies Proprietary Limited 48 – Morvest Human Capital Management Proprietary Limited 1 – Foster Melliar Proprietary Limited 1 – Advocate Solutions Proprietary Limited 10 –

Management and administration fees received from related partiesMorvest Outsourcing Solutions Proprietary Limited 12 000 12 000

Rent received from related partiesIntergraph Systems Southern Africa Proprietary Limited 1 091 1 091 Red Edge Solutions Proprietary Limited 52 52 ITQ Business Solutions Proprietary Limited 44 44 Applebox Franchising Proprietary Limited 15 15 Swop and Shop Proprietary Limited 5 – Foster Melliar Proprietary Limited 1 423 1 423

Sales to related partiesMorvest Professional Services Proprietary Limited – 2 244 Morvest Mithratech Proprietary Limited 278 – ITQ Business Solutions Proprietary Limited 66 539 ITQ Business Solutions Proprietary Limited – 1 583 Mint Management Technologies Proprietary Limited 252 – Intergraph Systems Southern Africa Proprietary Limited 1 318 1 287 Matomo Technologies Proprietary Limited – 62 Premium Ideas South Africa Proprietary Limited 24 906 – Morvest Professional Services Proprietary Limited – 132 Morvest Outsourcing Solutions Proprietary Limited 7 548 – Foster Melliar Proprietary Limited 1 620 – Morvest Human Capital Management Proprietary Limited 40 17 682

Purchases from related partiesAdvocate Solutions Proprietary Limited 22 – Intergraph Systems Southern Africa Proprietary Limited 89 346 Red Edge Solutions Proprietary Limited 152 – SAB and T Business Innovations Group Proprietary Limited – 81 Foster Melliar Proprietary Limited 1 – Morvest Human Capital Management Proprietary Limited 1 –




40. Financial risk managementIntroduction and overviewThe Group is exposed to a variety of financial risks from its use of financial assets and liabilities:• Credit risk• Liquidity risk• Market risk – Interest rate risk – Foreign exchange risk• Capital risk management

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

Risk management frameworkThe Board of directors have overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has established the Audit and Risk Management Committee, which is responsible for developing and monitoring the Group’s risk management policies. The Committee reports regularly to the Board of directors on its activities.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Group Audit and Risk Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group Audit and Risk Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

There have been no changes to the objectives, policies and processes for managing the risk and methods used to manage the risk from prior year.

Credit risk Credit risk relates to the risk of financial loss to the Group relating to customers, loans receivables and other financial instruments who fail to meet there contractual obligations. The potential exposure on these financial instruments is inherent in trade receivables, loans, bank and call deposits.

Trade and other receivablesThe Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk. Approximately 31% (2012: 28%) of the Group’s revenue is attributable to sales transactions with a single multinational customer.

The Group has established a credit policy under which each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered.

More than 70% of the Group’s customers have been transacting with the Group for over four years, and no impairment loss has been recognised against these customers. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or legal entity, whether they are a wholesale, retail or end-user customer, geographic location, industry, aging profile, maturity and existence of previous financial difficulties. Trade and other receivables relate to a wide spread of customers.

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets.


40. Financial risk management (continued)At the reporting date, the Group did not consider there to be any significant concentration of credit risk which has not been adequately provided for.

The Board has delegated the responsibility of managing the credit risk to the managing executives of each subsidiary, who are responsible for: – establishing the authorisation structure for the approval and renewal of credit facilities;– reviewing and assessing credit risk;– monitoring the financial position of customers on an on-going basis; and– formulating credit policies in relation to the subsidiary’s business and customer base.

The Group held cash and cash equivalents of R83 130 574 at 31 May 2013 (2012: R103 731 542), which represents its maximum credit exposure on these assets.

Financial assets exposed to credit risk at year-end were as follows:

Group Company

2013 R’000

2012 R’000

2013 R’000

2012 R’000

Financial instrumentTrade and other receivables 136 330 128 539 28 359 30 918 Cash and cash equivalents 83 131 103 732 5 697 1 662 Financial assets 5 534 836 – 20 249 Loans to Group companies – – 156 764 58 821

224 995 233 107 190 820 111 650

Loans made to Group subsidiariesLoans made to Group subsidiaries do not expose the Group to credit risk as the Group manages this risk by setting off future transactions with the Group against these balances.

Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

An analysis of the Group’s financial assets and liabilities into relevant maturity groupings based on the remaining period at the reporting date to contractual maturity date are as follows based on undiscounted cash flows:




<1 yearR’000

1 year – 5 years

R’000> 5 years

R’000Total

R’000

40. Financial risk management (continued)2013Financial assetsCash and cash equivalents 83 131 – – 83 131 Trade and other receivables 136 330 – – 136 330 Other financial assets 5 534 – – 5 534

Total financial assets 224 995 – – 224 995

Financial liabilitiesTrade and other payables 106 982 – – 106 982 Other financial liabilities 27 892 56 991 – 84 883 Finance lease obligation 10 394 21 472 – 31 866 Vendor liabilities 17 714 4 717 – 22 431

Total financial liabilities 162 982 83 180 – 246 162

Net liquidity gap 62 013 (83 180) – (21 167)

2012Financial assetsCash and cash equivalents 103 732 – – 103 732 Trade and other receivables 128 539 – – 128 539 Other financial assets 836 – – 836

Total financial assets 233 107 – – 233 107

Financial liabilitiesTrade and other payables 175 872 – – 175 872 Other financial liabilities 22 528 78 849 – 101 377 Finance lease obligation 4 735 7 046 – 11 781 Vendor liabilities 10 000 18 000 – 28 000

Total financial liabilities 213 135 103 895 – 317 030

Net liquidity gap 19 972 (103 895) – (83 923)

Market riskMarket risk is the risk that changes in market prices, such as interest rates, equity prices, foreign exchange rates and credit spreads will affect the Group’s income or the value if its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

Interest rate riskThe Group’s cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate owing to changes in the market interest rates. The fair value interest rate risk is the risk that the value of the financial instrument will fluctuate because of changes in the market interest rates. The Group assumes exposure to the effects of fluctuations in the prevailing levels of market interest rates on both the fair value and cash flow risks. The analysis below summarises the exposure to interest rate risk. Financial assets and liabilities are categorised by the earlier of contractual re-pricing or maturity dates.


<1 year R’000

1 year – 5 years

R’000> 5 years

R’000

Non-interest bearing

R’000Total

R’000

40. Financial risk management (continued)2013Financial assetsCash and cash equivalents 83 131 – – – 83 131 Trade and other receivables 136 330 – – – 136 330 Other financial assets – – – 5 534 5 534

Total financial assets 219 461 – – 5 534 224 995

Financial liabilitiesTrade and other payables 106 982 – – – 106 982 Other financial liabilities 27 892 56 991 – 5 363 90 246 Finance lease obligation 8 735 19 590 – – 28 325 Vendor liabilities 17 714 4 717 – – 22 431

Total financial liabilities 161 323 81 298 – 5 363 247 984

Interest rate gap 58 138 (81 298) – 171 (22 989)

2012Financial assetsCash and cash equivalents 103 732 – – – 103 732 Trade and other receivables 128 539 – – – 128 539 Other financial assets – – – – – Available-for-sale – – – 836 836

Total financial assets 232 271 – – 836 233 107

Financial liabilitiesTrade and other payables 175 872 – – – 175 872 Other financial liabilities 16 509 64 312 – 1 173 81 994 Finance lease obligation 3 774 5 744 – – 9 518 Vendor liabilities 8 056 14 114 – – 22 170

Total financial liabilities 204 211 84 170 – 1 173 289 554

Interest rate gap 28 060 (84 170) – (337) (56 447)

Interest rate sensitivity analysisAs at 31 May 2013, if the interest rate on variable rate assets and liabilities held at amortised cost and assets and liabilities accounted for at fair value had increased or decreased by 200 basis points with all other variables held constant, the impact in profit and loss would have been as set out in the table below:

Pre-tax2013

R’000

Post-tax2013

R’000

Pre-tax2012

R’000

Post-tax2012

R’000

Increase 2 712 1 953 2 516 1 812 Decrease (2 712) (1 953) (2 516) (1 812)

Foreign exchange riskThe Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar, British Pound, Nigerian Naira and Mozambican Meticals. Foreign exchange risk arises from commercial transactions, recognised assets and liabilities and net investments in foreign operations.




40. Financial risk management (continued)The Group has set up policies that require Group companies to manage their foreign exchange risk against their functional currency. The Group companies are required to use derivative financial instruments for their foreign exchange risk exposure with financial institutions. To manage their foreign exchange risk arising from commercial transactions and recognised assets and liabilities, entities in the company use forward contracts, transacted with financial institutions. Foreign exchange risk arises when commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.

The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. This will have no effect on the post-tax profit as the effect of the translation is recognised directly in the foreign currency translation reserve.

Summary of Group’s foreign currency exposure on its financial assets and liabilities in Rand is as follows:

2013 R’000

2012 R’000

Financial assetsCash and cash equivalents– Mithratech Mozambique 1 397 2 099 – Premium Ideas Nigeria 1 840 5 433 – Intergraph Nigeria 751 90

3 988 7 622

Trade and other receivables– Mithratech Mozambique 1 584 295 – Premium Ideas Nigeria 6 036 7 255 – Intergraph Nigeria 1 159 128 – Other local subsidiaries – 1 399

8 779 9 077

Total financial assets 12 767 16 699

Financial liabilitiesTrade and other payables– Mithratech Mozambique 141 126 – Premium Ideas Nigeria 2 088 1 804 – Intergraph Nigeria 789 –– Other local subsidiaries 2 940 8 916

5 958 10 846

Finance lease obligation– Premium Ideas Nigeria 494 138

Total financial liabilities 6 452 10 984

Exchange rates used for conversion of foreign items to Rand were:

Closing2013

Closing2012

Average2013

Average2012

CurrencyUS Dollar (USD) 9,892 8,416 8,699 7,640British Pound (GBP) 15,001 13,109 13,644 12,139Mozambique New Metical (MZN) 0,335 0,304 0,298 0,279Nigerian Naira (NGN) 0,063 0,053 0,054 0,048

Capital riskThe Group’s objective when managing capital is to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders, benefits for others stakeholders and to provide an adequate return to shareholders by pricing products and services adequately with a moderate level of risk.


Financial risk management (continued)The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 28, equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings; and cash and cash equivalents as disclosed in notes 23 and 24, respectively.

The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may issue dividends to shareholders, issue new shares, or sell assets to reduce debt.

The Group monitors capital on the basis of total debt to total equity ratio.

The Group’s strategy is to maintain the debt to equity ratio within a range of 1:1,5 to 1:4, in order to secure access to finance at a reasonable cost. The Group’s overall strategy remains unchanged from 2012. The debt to equity ratio is as follows:

Group

2013 R’000

2012 R’000

Total debt 135 639 113 682 Total equity 229 582 228 711

Debt to equity ratio (Target 1:3) 1:1,69 1:2,01

From time to time the Group purchases its own shares on the market; the timing of these purchases depends on market prices. Primarily the shares are intended to be used for issuing shares under the Group’s share option programme. Buy and sell decisions are made on a specific transaction basis by the Board and approved by the shareholders at the AGM.

There were no changes in the Group’s approach to capital management during the year.

41. Directors’ emoluments41.1 Directors’ emoluments

The directors’ emoluments of Morvest Business Group Limited for the year are set out below:

DirectorFees

R’000

Basic salaryR’000

BonusesR’000

Allow-ancesR’000

Basic emolu-

mentsR’000

Total emolu-mentsR’000

2013Non-executiveB Marx 254 – – – – 254 NY Mhinga 248 – – – – 248 PS Molefe 311 311 A Mohammadali-Haji 250 – – – – 250

1 063 – – – – 1 063

ExecutiveM Papiyana – 897 1 621 260 2 778 2 778 A Evan – 1 024 900 262 2 186 2 186 S Singh – 1 375 1 186 303 2 864 2 864 MS Varachia – 3 479 2 239 1 024 6 742 6 742

– 6 775 5 946 1 849 14 570 14 570

1 063 6 775 5 946 1 849 14 570 15 633




DirectorFees

R’000

Basic salaryR’000

BonusesR’000

Allow-ancesR’000

Basic emolu-

mentsR’000


41. Directors’ emoluments (continued)41.1 Directors’ emoluments (continued)

2012Non-executiveB Marx 250 – – – – 250 NY Mhinga 248 – – – – 248 PS Molefe 308 – – – – 308 A Mohammadali-Haji 238 – – – – 238

1 044 – – – – 1 044

ExecutiveM Papiyana – 936 979 308 2 223 2 223 N Singh* – 1 201 54 127 1 382 1 382 A Evan – 1 014 1 061 199 2 274 2 274 S Singh – 1 374 1 119 320 2 813 2 813 MS Varachia – 2 337 1 712 680 4 729 4 729

– 6 862 4 925 1 634 13 421 13 421

1 044 6 862 4 925 1 634 13 421 14 465

* Resigned.

Director

Paid by company

R’000

Paid by subsidiary

R’000

Basic emolu-

mentsR’000


2013Non-executiveB Marx – 254 254 254 NY Mhinga – 248 – 248 PS Molefe – 311 – 311 A Mohammadali-Haji – 250 250 250

– 1 063 504 1 063

ExecutiveM Papiyana – 2 778 2 778 2 778 A Evan – 2 186 2 186 2 186 S Singh – 2 864 2 864 2 864 MS Varachia – 6 742 6 742 6 742

– 14 570 14 570 14 570

– 15 633 15 074 15 633


Director

Paid by company

R’000

Paid by subsidiary

R’000

Basic emolu-

mentsR’000

Other**R’000


41. Directors’ emoluments (continued)41.1 Directors’ emoluments (continued)

2012Non-executiveB Marx 250 – 250 – 250 NY Mhinga 248 – 248 – 248 PS Molefe 308 – 308 – 308 A Mohammadali-Haji 238 – 238 – 238

1 044 – 1 044 – 1 044

ExecutiveM Papiyana – 2 223 2 223 – 2 223 N Singh – 1 382 1 382 – 1 382 A Evan – 2 274 2 274 – 2 274 S Singh – 2 813 2 813 – 2 813 MS Varachia – 4 729 4 729 – 4 729

– 13 421 13 421 – 13 421

1 044 13 421 14 465 – 14 465

41.2 Share-based paymentBEECo scheme issued on 11/10/2010

NameStrike price

Date of issue

Period granted

Number of shares

‘000 Exercised

Net gains on options exercised

R’000

2013A Evan 23 11/10/10 5 years 9 114 – –M Papiyana 23 11/10/10 5 years 3 590 – –MS Varachia 23 11/10/10 5 years 77 190 – –S Singh 23 11/10/10 5 years 13 809 – –KJ Molefe 23 11/10/10 5 years 5 525 – –NY Mhinga 23 11/10/10 5 years 2 761 – –

111 989 – –

N Singh’s shares amounting to 8,8 million shares have been re-allocated to the other members of BEECo in terms of the transaction agreement.

NameStrike price

Date of issue

Period granted

Number of shares

‘000 Exercised

Net gains on options

exercisedR’000

2012A Evan 23 11/10/10 5 years 8 426 – – M Papiyana 23 11/10/10 5 years 3 319 – – MS Varachia 23 11/10/10 5 years 71 363 – – S Singh 23 11/10/10 5 years 12 766 – – KJ Molefe 23 11/10/10 5 years 5 107 – – NY Mhinga 23 11/10/10 5 years 2 553 – – NM Singh 23 11/10/10 5 years 8 862 – –

112 396 – –




41. Directors’ emoluments (continued)41.3 Directors’ shareholding

Director

Direct beneficial

‘000

Indirect beneficial

‘000

Held by associates

‘000Total‘000 %

As at 31 May 2013MS Varachia – 118 532 – 118 532 17,45NY Mhinga 2 000 2 761 – 4 761 0,70S Singh 5 000 13 809 – 18 809 2,77A Evan 3 300 9 114 – 12 414 1,83M Papiyana 2 300 3 590 – 5 890 0,87P Molefe 258 11 224 – 11 482 1,69

12 858 159 030 – 171 888 25,31

As at 31 May 2012MS Varachia – 71 363 37 950 109 313 16,10NY Mhinga 2 000 2 533 – 4 533 0,67S Singh 5 000 12 766 – 17 766 2,62A Evan 3 300 10 780 – 14 080 2,07M Papiyana 2 300 3 319 – 5 619 0,83N Singh 3 393 8 662 – 12 055 1,77P Molefe 258 10 807 – 11 065 1,63

16 251 120 230 37 950 174 431 25,68

42. Subsequent eventsBEE transactionMorvest has entered into certain agreements with Business Venture Investments No. 1690 Proprietary Limited (“BEECo”) in terms of which, subject to the fulfilment or waiver, as the case may be, of certain conditions precedent, including shareholder approval. BEECo will subscribe for and acquire 290 000 000 new Morvest shares, representing 33% of the post-transaction issued share capital of Morvest, by means of the issue 222 171 121 new Morvest shares to BEECo by means of a specific issue of shares for cash (“the BEECo issue”) and the acquisition by BEECo of 67 828 879 Morvest treasury shares (“the BEECo acquisition”), respectively. The take-up of shares in the Group by key executives will boost direct black shareholding to enable Morvest to retain existing public and private sector contracts, secure upcoming contract renewals as well as bring on stream new business, all while aligning management’s interests with shareholders.

The circular for the approval of the BEE transaction has been posted to shareholders on 22 August 2013.

The financial effects as announced on SENS on 22 August 2013 is as follows:

Per Morvest share (cents)

As at 30 November

2012 Before

After the BEE

transactionChange

%

Pro forma after the BEE

transaction and

consolidationChange

%

Basic earnings (0,62) (0,40) 36,1 (1,18) (90,3)Fully diluted earnings (0,49) (0,34) 30,6 (0,89) (81,4)Headline earnings 5,20 3,27 (37,1) 4,63 (10,8)Fully diluted headline earnings 4,08 2,79 (31,7) 3,47 (15,0)Net asset value 34,71 28,57 (17,7) 23,46 (32,4)Net tangible asset value 5,77 8,88 54,0 3,77 (34,7)

Weighted average shares (‘000) 493 141 783 141 – 493 141 –Diluted weighted average shares (‘000) 628 141 918 141 – 659 212 –Number of shares (‘000) 617 850 907 850 – 907 850 –

Post the BEE transaction the maximum number of shares will be 880 million shares.

There are no other matters or circumstances arising since the end of the financial year ended 31 May 2013.

Shareholderinformation


as at 31 May 2013

Analysis of shareholders

No of shareholdings %

Number of shares %

Shareholder spread1 – 1 000 shares 255 9,48 132 730 0,021 001 – 10 000 shares 993 36,91 5 047 672 0,7410 001 – 100 000 shares 1 051 39,07 42 099 137 6,20100 001 – 1 000 000 shares 314 11,67 108 269 899 15,941 000 001 shares and over 77 2,86 523 609 175 77,10

Totals 2 690 100,00 679 158 613 100,00

Distribution of shareholdersBanks 8 0,30 2 821 584 0,42Close corporations 40 1,49 30 896 593 4,55Endowment funds 8 0,30 117 790 0,02Individuals 2 425 90,15 315 883 673 46,51Investment company 2 0,07 1 850 091 0,27Management & staff 1 0,04 20 250 000 2,98Mutual funds 3 0,11 28 130 951 4,14Nominees & trusts 116 4,31 35 339 780 5,20Other corporations 20 0,74 1 937 572 0,29Own holdings 3 0,11 74 785 104 11,01Private companies 58 2,16 150 146 403 22,11Public companies 4 0,15 16 079 805 2,37Retirement fund 1 0,04 900 000 0,13Share incentive scheme 1 0,04 19 267 0,00

Totals 2 690 100,00 679 158 613 100,00

Public/non-public shareholdersNon-public shareholders 16 0,59 270 180 589 39,78Directors of the company 11 0,41 175 126 218 25,79Management & staff 1 0,04 20 250 000 2,98Own holdings 3 0,11 74 785 104 11,01Share incentive scheme 1 0,04 19 267 0,00Public shareholders 2 674 99,41 408 978 024 60,22

Totals 2 690 100,00 679 158 613 100,00

Beneficial shareholders holding 5% or morePavati Trading 63 Proprietary Limited 114 750 000 16,90Morvest Information Communication Technology Proprietary Limited 56 272 499 8,29MS Varachia Holdings Company Proprietary Limited 41 342 028 6,09

Totals 212 364 527 31,27


12 Months to May 2013

JSE Performance

Closing price (cents) 18

High for the year (cents) 25

Low for the year (cents) 16

Volume of shares traded 156 362 995

Volume traded as % of number in issue 23%

Value of shares traded (R) 30 299 407

PE ratio 2,52

Dividend yield 5%

Shareholder’s diary

Financial year-end 31 May

Annual general meeting 29 November 2013

Announcement of interim results February

Announcement of annual results August

Posting of annual report October


Notice of annual general meeting

Morvest Business Group Limited(Incorporated in the Republic of South Africa) (Registration number 2003/012583/06)JSE code: MOR ISIN: ZAE000152567 (“Morvest” or “the company”)

Notice is hereby given to the shareholders of the company that the annual general meeting of “the company” will be held at 188 14th Road, Noordwyk, Midrand, at 10:00 on Friday, 29 November 2013 to (i) consider and, if deemed fi t to pass, with or without modifi cation, the following ordinary and special resolutions, in the manner required by the Companies Act, No 71 of 2008, as amended from time to time, and all schedules and regulations published pursuant thereto (the “Companies Act”), as read with the JSE Limited (“JSE”) Listings Requirements (“JSE Listings Requirements”); and (ii) deal with such other business as may lawfully be dealt with at the meeting, which meeting is to be participated in and voted at by shareholders registered as such as at Friday, 22 November 2013, being the record date to participate in and vote at the annual general meeting in terms of section 62(3)(a), read with section 59(1)(b), of the Companies Act. The record date to receive notice of the annual general meeting in terms of section 59(1)(a) of the Companies Act is Friday, 25 October 2013. The last day to trade to be eligible to vote at the annual general meeting is Friday, 15 November 2013.

Ordinary resolutionsOrdinary resolution 1: Adoption of annual fi nancial statements“Resolved that the annual fi nancial statements of the company for the year ended 31 May 2013, including the directors’ report and the report of the Audit and Risk Committee, be and are hereby received and adopted.”

The percentage of voting rights required for this resolution to be adopted is at least 50% of the voting rights plus one vote exercised on the resolution.

Ordinary resolution 2: Re-election of directorsIn terms of clause 108 of the company’s Memorandum of Incorporation (“MoI”), the following directors retire by rotation at the annual general meeting, but being eligible, offer themselves for re-election: 2.1 Re-election of director “Resolved that A Mohammadali-Haji, who retires

by rotation and who is eligible and available for re-election, be re-elected as a director of the company.”

A brief curriculum vitae in respect of A Mohammadali-Haji is included on page 21 of the annual report of which this notice forms part.

2.2 Re-election of director “Resolved that NY Mhinga, who retires by rotation

and who is eligible and available for re-election, be re-elected as a director of the company.”

A brief curriculum vitae in respect of NY Mhinga is included on page 21 of the annual report of which this notice forms part.

2.3 Re-election of director “Resolved that Dr PS Molefe, who retires by rotation

and who is eligible and available for re-election, be re-elected as a director of the company.”

A brief curriculum vitae in respect of Dr PS Molefe is included on page 21 of the annual report of which this notice forms part.

The election of each director who, among other things, retires by rotation is required at the company’s annual general meeting. The election will be conducted by a series of votes, each of which is on the candidacy of a single individual to fi ll a single vacancy as required under section 68(2) of the Companies Act.


Ordinary resolution 3: Appointment of auditors“Resolved that Mazars (Gauteng) Inc. (previously PKF (Gauteng) Inc.) be and are hereby re-appointed as auditors of the company for the ensuing fi nancial year and the directors be and are hereby authorised to fi x the remuneration of the auditors and to note that the individual registered auditor who will undertake the audit during the fi nancial year ending 31 May 2014 will be Manoj Manilal.”


Ordinary resolution 4: Appointment of Audit and Risk Committee members“Resolved that shareholders elect, each by way of a separate vote, the following non-executive directors, as members of the company’s Audit and Risk Committee in terms of section 94(2) of the Companies Act: 4.1 Appointment of B Marx as a member of the Audit and

Risk Committee “Resolved that B Marx be and is hereby elected as

a member of the Audit and Risk Committee of the company,”

4.2 Appointment of NY Mhinga as a member of the Audit and Risk Committee

“Resolved that NY Mhinga be and is hereby elected as a member of the Audit and Risk Committee of the company,”

4.3 Appointment of A Mohammadali-Haji as a member of the Audit and Risk Committee

“Resolved that A Mohammadali-Haji be and is hereby elected as a member of the Audit and Risk Committee of the company,”


A brief curriculum vitae in respect of each of the above Audit and Risk Committee members is included on page 21 of the annual report of which this notice forms part.


Ordinary resolution 5: General authority to allot and issue ordinary shares for cash“Resolved that pursuant to the MoI of the company, the directors of the company and/or of its subsidiaries be and are hereby authorised, until the next annual general meeting of the company (when this authority shall lapse unless it is renewed at that annual general meeting, provided that it shall not extend beyond 15 months from the date of this resolution), to:• allot and issue, or issue any options in respect of all or

any of the authorised but unissued ordinary shares in the capital of the company; and/or

• sell or otherwise dispose of or transfer, or issue any options in respect of ordinary shares purchased by subsidiaries of the company, for cash subject to the Listings Requirements of the JSE on the following basis:

(a) the allotment and issue of ordinary shares for cash shall be made only to persons qualifying as public shareholders as defi ned in the Listings Requirements of the JSE, and not to related parties;

(b) the number of ordinary shares issued for cash shall not in the aggregate in any one fi nancial year of the company (commencing 1 June 2013) exceed 15% of the company’s issued ordinary shares. The number of ordinary shares which may be issued for cash shall be based on the number of ordinary shares in issue at the date of the application, less any ordinary shares issued by the company during the current fi nancial year, provided that any ordinary shares to be issued for cash pursuant to a rights issue (announced and irrevocable and underwritten) or acquisition (concluded up to the date of application) may be included as though they were ordinary shares in issue at the date of application;

(c) the maximum discount at which ordinary shares may be issued for cash is 10% of the weighted average traded price on the JSE of those ordinary shares over 30 days prior to the date that the price of the issue is agreed between the issuer and the party subscribing for the securities;

(d) after the company has issued ordinary shares for cash which represent, on a cumulative basis within a fi nancial year, 5% or more of the number of ordinary shares in issue prior to that issue, the company shall publish an announcement containing full details of the issue, including the effect of the issue on the net asset value and earnings per share of the company;

(e) the securities which are the subject of the issue for cash must be of a class already in issue, or where this is not the case, must be limited to such securities or rights as are convertible into a class already in issue; and

(f) whenever the company wishes to use ordinary shares, held as treasury stock by a subsidiary of the company, such use must comply with the JSE Listings Requirements as if such use was a fresh issue of ordinary shares.”

In terms of the Listings Requirements of the JSE, a 75% majority of the votes cast by shareholders present or represented by proxy (excluding the designated advisor and the controlling shareholders together with their associates) at the annual general meeting must be cast in favour of ordinary resolution number 5 for it to be approved.

Ordinary resolution 6: Remuneration philosophy“To approve, by way of a non-binding advisory vote, the remuneration philosophy of the company as set out on page 38 of this annual integrated report.”


Ordinary resolution 7: Signature of documentation“Resolved that any director or the Company Secretary of the company be and is hereby authorised to sign all such documents and do all such things as may be necessary or incidental to the implementation of ordinary resolutions 1, 2, 3, 4, 5 and 6 and special resolutions 1, 2, 3 and 4.

Special resolutionsSpecial resolution 1: Repurchase of shares “Resolved as a special resolution that, subject to section 48 the Companies Act, the MoI, the JSE Listings Requirements and the restrictions set out below, the repurchase of shares of the company either by the company or by any subsidiary of the company is hereby authorised, on the basis that: (a) The general authority given in terms of this resolution

shall remain in force until the conclusion of the next annual general meeting of the company or 15 months from the date on which this resolution is passed, whichever is the earlier date.

(b) The general authority in (a) shall provide authorisation to the board of directors to repurchase on behalf of the company, shares in the issued share capital of the company as follows:

(i) it will be limited, in any fi nancial year of the company, to a maximum of 20% of the issued share capital of the company on the date on which this special resolution is passed;

(ii) the repurchase of shares issued by the company may not be at a price which exceeds 10% of the weighted average of the market value at which Morvest shares of the same class traded on the JSE


Notice of annual general meeting

for the fi ve business days immediately preceding the date on which the transaction is effected;

(iii) any such repurchase will be implemented through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the company and the counter party;

(iv) an announcement will be published as soon as the company has repurchased ordinary shares constituting, on a cumulative basis, 3% of the number of ordinary shares in issue prior to the repurchase pursuant to which the aforesaid 3% threshold was reached (and for each 3% in aggregate of the initial number of that class acquired thereafter). Such announcement must contain full details of such acquisitions;

(v) the company (or any subsidiary) must be authorised to do so in terms of its MoI;

(vi) at any point in time, the company may only appoint one agent to effect any repurchase(s) on the company’s behalf;

(vii) a resolution by the board of directors that they authorised the repurchase, that the company passed the solvency and liquidity test and that since the test was done there have been no material changes to the fi nancial position of the 0; and

(viii) repurchases may not take place during a prohibited period as defi ned in paragraph 3.67 of the JSE Listings Requirements unless there is a repurchase programme in place and the dates and quantities of shares to be repurchased during the prohibited period are fi xed and full details thereof have been disclosed in an announcement over SENS prior to commencement of the prohibited period.

(c) The exercise by the directors of the authority to procure the repurchase by the company’s subsidiaries of shares in terms of (b), shall be subject, mutatis mutandis, to the same terms and conditions as those set out above.

Having considered the aggregate effect of the maximum repurchase of 20% of the company’s issued share capital in any one fi nancial year pursuant to the general authority to repurchase shares, the board of directors is of the opinion that, for a period of 12 months after the date of the repurchase:(i) the company and the Group will be able to repay their

debts, in the ordinary course of business;(ii) the company and the Group’s assets will be in excess

of the liabilities of the company and the Group. For this purpose, the assets and liabilities should be recognised and measured in accordance with the accounting policies used in the latest audited Group annual fi nancial statements;

(iii) the company and the Group’s ordinary share capital

and reserves will be adequate for ordinary business

purposes; and

(iv) the company and the Group will have suffi cient working

capital for the ordinary business purposes.”

The board is of the opinion that this authority should be

in place so as to enable the company, as and when the

opportunity presents itself, to repurchase shares. The

company’s sponsor will confi rm the adequacy of the

company’s working capital for purposes of undertaking

the repurchase of shares in writing to the JSE prior to the

company (or any subsidiary) entering the market to proceed

with the repurchase.

The following additional information, some of which

may appear elsewhere in the annual report of which this

notice forms part, is provided in terms of the JSE Listings

Requirements for purposes of this general authority:

• directors and management – see page 21 of the annual

report;

• major benefi cial shareholders – see page 126 of the

annual report;

• directors’ interests in ordinary shares – see page 124 of

the annual report; and

• share capital of the company – see page 105 of the

annual report.

Litigation statementThe directors, whose names appear on page 21 of the

annual report of which this notice forms part, are not

aware of any legal or arbitration proceedings, including

proceedings that are pending or threatened, that may have

or have had in the recent past, being at least the previous

twelve (12) months, a material effect of the fi nancial position

of the company or its subsidiaries.

Directors’ responsibility statementThe directors, whose names appear on page 21 of the

annual report of which this notice forms part, collectively

and individually, accept full responsibility for the accuracy

of the information pertaining to this special resolution and

certify that, to the best of their knowledge and belief, there

are no facts that have been omitted which would make

any statement false or misleading and that all reasonable

enquiries to ascertain such facts have been made and that

the special resolution contains all necessary information

contained in the Companies Act and the JSE Listings

Requirements.

Material changesOther than the facts and developments reported on in

this annual report, there have been no material changes

in the affairs or fi nancial position of the company and its

subsidiaries since the date of signature of the audit report

and up to the date of this notice.


Reason and effect of special resolution number 1The reason for the passing of special resolution number 1 is to authorise the company to repurchase shares issued by it and to enable its subsidiary companies to acquire shares in its share capital.

The effect of the passing of special resolution number 1 is that the company is authorised to repurchase shares issued by it and that the company’s subsidiary companies will be able to repurchase shares in the share capital of the company, as set out above.

Any matters raised by shareholders, with or without advance notice to the company.

To deal, at the annual general meeting, with any matters raised by shareholders, with or without advance notice to the company.

The percentage of voting rights required for this resolution to be adopted is at least 75% of the voting rights exercised on the resolution.

Special resolution number 2: Financial assistance“Resolved that, as a special resolution, in terms of section 45 of the Companies Act, 71 of 2008, as amended (“the Companies Act”), the shareholders of the company hereby approve of the company providing, at any time and from time to time during the period of 2 (two) years commencing on the date of this special resolution, any direct or indirect fi nancial assistance as contemplated in section 45 of the Companies Act to any 1 (one) or more related or inter-related companies or corporations of the company.

(a) (i) the recipient or recipients of such fi nancial assistance, and (ii) the form, nature and extent of such fi nancial assistance, and (iii) the terms and conditions under which such fi nancial assistance is provided, are determined by the board of directors of the company from time to time; and

(b) the board of directors of the company may not authorise the company to provide any fi nancial assistance pursuant to this special resolution unless the board meets all those requirements of section 45 of the Companies Act which it is required to meet in order to authorise the company to provide such fi nancial assistance.”


Special resolution number 3: Approval of directors’ remunerationResolved that in terms of section 66(9) of the Companies Act, the company be authorised to pay remuneration to its directors for their services as directors as listed below.

Approved fee for the

year ending 31 May

2013

Proposed fee for the

year ending31 May

2014

Annual feeNon-Executive DirectorsChairman of the board R300 000 R318 000Board member R240 000 R254 400

Meeting feeNon-Executive DirectorsChairman of the board R3 250 R3 445Members of the board R1 250 R1 325Chairman of Audit and Risk Committee R2 500 R2 650Member of Audit and Risk Committee R1 250 R1 325Chairman of all other committees R1 250 R1 325Members of all other committees R1 000 R1 060

In terms of sections 66(8) and (9) of the Companies Act, remuneration only be paid to directors for their services as directors in accordance with a special resolution approved by shareholders within the previous two years.

The reason for special resolution 3 is to obtain shareholder approval by special resolution for directors’ remuneration for services as directors in compliance with the Companies Act.

It is noted that the remuneration payable to directors in their capacities as such and does not include salaries and other benefi ts payable to directors in other capacities.


Special resolution number 4: Memorandum of Incorporation of the company“Resolved that, the company’s new Memorandum of Incorporation as contemplated in the Companies Act, a copy of which has been tabled at this annual general meeting, be and is hereby adopted in accordance with the provisions of section 16(1)(c) of the Companies Act and in compliance with Schedule 10 of the JSE Listings Requirements, to apply in substitution for and to the exclusion of the company’s existing MoI and Articles of Association, with effect from the date of approval of this special resolution number 4.”

The reason for special resolution number 4 is to enable the company to adopt a new MoI that will be in line with the requirements of Companies Act, the JSE Listings Requirements and any applicable legislation. In addition


Notice of annual general meeting (continued)

to the Companies Act and changes to the Listings Requirements and developments in market practice require a substantial number of changes to the existing Memorandum of Association and Articles of Association of the company. Accordingly, it is considered more appropriate to adopt the proposed new MoI rather than to amend the existing MoI and Articles of Association. The salient features of the proposed MoI are contained in Annexure A of this notice of annual general meeting.

The MoI has been made available for inspection at the registered address of the company, being 188 14th Road, Noordwyk, Midrand, weekdays during offi ce hours from Wednesday, 30 October 2013 to Friday, 29 November 2013 and is also available on the company’s website, www.morvest.co.za.

The effect of special resolution number 4 will be that the new MoI will substitute the company’s existing MoI/Memorandum and Articles of Association in their entirety.

The percentage of voting rights required for this resolution to be adopted is at least 75% of the voting rights exercised on the resolution by shareholders present or represented by proxy at the general meeting.

Electronic participationIn terms of section 61(10) of the Companies Act, every shareholders meeting of a public company must be reasonably accessible within South Africa for electronic participation by shareholders.

Shareholders wishing to participate electronically in the annual general meeting are required to deliver written notice to the company at 188 14th Road, Noordwyk, Midrand (marked for the attention of the Company Secretary) by no later than 10:00 on Friday, 15 November 2013 that they wish to participate via electronic communication at the annual general meeting (the “electronic notice”).

In order for the electronic notice to be valid it must contain: (a) if the shareholder is an individual, a certifi ed copy of his identity document and/or passport; (b) if the shareholder is not an individual, a certifi ed copy of a resolution by the relevant entity and a certifi ed copy of the identity documents and/or passports of the persons who passed the relevant resolution. The relevant resolution must set out who from the relevant entity is authorised to represent the relevant entity at the annual general meeting via electronic communication; (c) a valid e- mail address and/or facsimile number (the “contract address/number”); and (d) if the shareholder wishes to vote via electronic communication, set out that the shareholder wishes to vote via electronic communication.

By no later than 24 hours before the time for the annual general meeting the company shall use its reasonable endeavours to notify a shareholder at its contract address/number who has delivered a valid electronic notice of

the relevant details through which the shareholder can

participate via electronic communication.

Voting and proxiesAll shareholders are encouraged to attend, speak and

vote at the annual general meeting. On a show of hands,

every shareholder of the company present in person or

represented shall have one vote only. On a poll, every

shareholder present in person, by proxy or represented

shall have one vote for every share held.

A form of proxy is attached for the convenience of any

Morvest shareholder holding certifi cated shares who

cannot attend the annual general meeting of Morvest

shareholders or who wishes to be represented thereat.

Forms of proxy may also be obtained on request from

the company’s registered offi ce. The completed forms of

proxy must be deposited at or posted to the offi ce of the

transfer secretaries of the company to be received at least

48 hours prior to the meeting. Any member who completes

and lodges a form of proxy will nevertheless be entitled to

attend and vote in person at the general meeting should the

member subsequently decide to do so.

Morvest shareholders who have already dematerialised

their Morvest shares through a Central Securities

Depository Participant (“CSDP”) or broker and who wish

to attend the general meeting of Morvest shareholders

must instruct their CSDP or broker to issue them with the

necessary letter of representation to attend.

Dematerialised Morvest shareholders, who have elected

own-name registration in the sub-register through a CSDP

and who are unable to attend, but wish to vote at the annual

general meeting of Morvest shareholders, must complete

and return the attached form of proxy and lodge it with the

transfer secretaries of the company at least 48 hours prior

to the meeting.

Dematerialised Morvest shareholders, who have not

elected own-name registration in the sub-register through a

CSDP and who are unable to attend but who wish to vote at

the annual general meeting of Morvest shareholders should

ensure that the person or entity (such as a nominee) whose

name has been entered into the sub-register maintained

by a CSDP or broker completes and returns the attached

relevant forms of proxy in terms of which they appoint a

proxy to vote at the annual general meeting of Morvest

shareholders.

Equity securities held by a share trust or scheme will not

have their votes at general/annual general meetings taken

into account for the purposes of resolutions proposed in

terms of the JSE Listings Requirements.

Unlisted securities (if applicable) and shares held as

treasury shares may not vote.


NB: Section 63(1) of the Companies Act – Identifi cation of meeting participants.

Kindly note that meeting participants (including proxies) are required to provide reasonably satisfactory identifi cation before being entitled to attend or participate in a shareholders’ meeting. Forms of identifi cation include valid identity documents, drivers’ licences and passports.

By order of the board

NB JanuaryCompany Secretary

Registered offi ce188 14th Road, Noordwyk, Midrand, 1685PO Box 4307, Halfway House, Midrand, 1685

Transfer secretariesComputershare Investor Services Proprietary Limited70 Marshall Street, Johannesburg, 2001PO Box 61051, Marshalltown, 2107

27 August 2013


Annexure A – Summary of salient features of MoI

PART ONE: INTRODUCTION AND NATURE OF THE COMPANYIntroductionThe Morvest Business Group Limited (“Morvest” or “the

company”) has prepared a Memorandum of Incorporation

(“MoI”) in substitution of its existing MoI/Memorandum

of Association and Articles of Association to be in line

with the requirements of the Companies Act, 71 of 2008

(the “Companies Act”), the JSE Listings Requirements

(“Listings Requirements”) and any applicable legislation.

The proposed MoI: (i) incorporates changes necessitated

by the coming into force of the Companies Act and the

Companies Regulations of 2011 promulgated in terms of

the Companies Act (the “Regulations”); (ii) complies with

the Listings Requirements; and (iii) embodies principles

of good corporate governance. It is considered more

appropriate to adopt the proposed new MoI rather than

to amend the existing MoI/Memorandum and Articles of

Association. As such, the salient features of the proposed

MoI are contained below. It should be noted that this

summary is not intended to be an exhaustive summary of

the MoI and should be read in conjunction with the MoI,

which will be available for inspection at the registered

address of the company being 188 14th Road, Noordwyk,

Midrand, weekdays during offi ce hours from Wednesday,

30 October 2013 to Friday, 29 November 2013 (and is also

available on the company’s website, www.morvest.co.za).

All references to “section/s” in this document refer to the

corresponding sections of the Companies Act.

All references to “board” in this document refers to the

board of directors of the company from time to time.

Powers and capacity of the companyThe company has the powers and capacity of an individual

except to the extent that a juristic person is incapable of

exercising any such power, or having such capacity.

There is no provision of the MoI that constitutes a restrictive

condition in respect of the company as contemplated

in section 15(2)(b). The company is, therefore, not a

“ring-fenced” company and a third party dealing with

the company in good faith is entitled to presume that the

company has complied with all of the formal and procedural

requirements of the Companies Act and MoI.

Amendment of the MoIThe MoI may be amended by a special resolution, in

compliance with a court order, by the board in accordance

with section 17(1) or by a business rescue practitioner

(subject always to the Listings Requirements). The board

may not amend the MoI on the basis set out in section 16(1)(b)

(i.e. in terms of section 36(3)), nor in accordance with any

other alterable provisions of the Companies Act that allow

for alteration or amendment of the MoI by the board.

RulesThe board does not have the power or authority to make, amend or repeal any rules relating to the governance of the company, as contemplated in section 15(3).

PART TWO: CAPITALISATION AND SECURITIES OF THE COMPANYShare capital and variation of preferences, rights, limitations and other termsThe company is authorised to issue a specifi c number of ordinary par value shares (as defi ned in the MoI).

Only shareholders may increase, decrease, reclassify, classify, determine or vary the preferences rights limitations or other terms, create, convert, consolidate or subdivide any shares and/or any class of shares in the company. Should the shareholders do so, this will require an amendment to the MoI.

Authority to issue securities and options to subscribe for securities The board may only issue shares or other securities of the company if: (i) such shares or other securities have been authorised in terms of the MoI; and (ii) such issue of shares or other securities is approved by the shareholders of the company and the JSE (where necessary).

The board requires shareholder approval by way of: (i) special resolution, to issue shares, other securities convertible into shares (in terms of section 41), the grant of options or the grant of other rights exercisable for the securities (in terms of section 42); (ii) ordinary resolution, to issue options for allotment or subscription for shares or other securities (in terms of section 42); and (iii) ordinary resolution, in respect of any other shares and other securities not contemplated in (i) and (ii).

Any issue of shares or other securities must be executed in accordance with the Listings Requirements.

Shares must, therefore, be fully paid up. The approvals contemplated above may be in the form of a general or specifi c authority.

Debt instrumentsThe board may authorise the company to issue secured or unsecured debt instruments, as set out in section 43(2). Such debt instruments may not, however, grant the holder thereof any rights regarding: (i) attending and voting at general meetings; (ii) the appointment of directors; and (iii) receipt of any shares or other securities without shareholder approval by way of an ordinary resolution.

Capitalisation issueThe board is authorised to: (i) approve the issuing of any authorised shares as capitalisation shares; (ii) issue shares of one class as capitalisation shares in respect of another class; and (iii) resolve to permit shareholders to elect to receive a cash payment in lieu of capitalisation shares, provided it has considered and applied the solvency and liquidity test.


Subscription for sharesThe MoI incorporates provisions relating to the right of pre-emption of shareholders on the issue of shares, unless such shares are to be issued: (i) for the purposes of the acquisition of assets; (ii) for the purposes of an approved share incentive scheme; (iii) for the purposes of an amalgamation or merger; (iv) pursuant to the approval by the shareholders (and the JSE); (v) in terms of options or conversions rights, or as contemplated in section 40, or (vi) as a capitalisation issue.

Acquisition of shares issued by the companyThe board may determine, subject to section 48, that the company can acquire a number of its own shares. The board of a subsidiary of the company can, subject to section 48, acquire shares of its holding company (i.e. the company).

PART THREE: SHAREHOLDERSShareholders’ right of informationThe MoI includes provisions incorporating the principles contained in sections 24 and 26 of the Companies Act, and the relevant provisions of the Regulations relating to access to certain information and other records by, inter alia, the shareholders.

Shareholders’ meetingsThe company will not be required to hold any shareholders’ meetings other than those required by the Companies Act, the MoI and/or the Listings Requirements. An annual general meeting (“AGM”) must be convened once in each calendar year. The board is authorised to determine the location of any shareholders’ meeting. The AGM must provide for certain business to be transacted thereat e.g. presentation of audited fi nancial statements, election of directors etc.

The company must deliver a notice of each shareholders’ meeting, at least 15 business days before the meeting is to begin, in the prescribed manner and form to: (i) all of the shareholders of the company who have elected to receive such notices as of the record date for the meeting; and (ii) the JSE. The MoI does not limit or restrict the authority of the company to conduct a shareholders’ meeting entirely by electronic communication, as more fully contemplated in section 63(2).

Voting and quorumVoting at a shareholders’ meeting may either be by a show of hands (one vote per person) or by polling (where votes are determined in accordance with voting rights of the shares held by that person). A resolution put to a vote shall be decided on a show of hands, unless before or on the declaration of the results, a poll is demanded by any person in accordance with the Companies Act or by the Chairperson. A quorum at any shareholders’ meetings shall be at least three shareholders present in person or represented by proxy, and in addition, the shareholders meeting may not begin, and a matter to be decided may not begin to be considered, unless 25% of all of the voting

rights, entitled to be exercised in respect of at least one matter, or that matter, as the case may be, are present.

After quorum has been established, quorum must be maintained for the shareholders’ meeting, and consideration of any matter to continue.

ChairpersonThe Chairperson of the board, as determined in terms of the MoI, shall preside as the Chairperson at every shareholders’ meeting. The Chairperson shall not have a second or casting vote.

Shareholders’ resolutionsFor an ordinary resolution to be approved by shareholders, it must be supported by more than 50% of the voting rights exercised on the resolution. For a special resolution to be approved by shareholders it must be supported by at least 75% if the voting rights exercised on the resolution.

A resolution that could be voted on at a shareholders’ meeting may instead be submitted for consideration to the shareholders entitled to vote and be voted on in writing by such shareholders within 20 business days after the resolution has been submitted to them. If adopted, this resolution has the same effect as if it had been approved by voting at a shareholders’ meeting. However, all shareholders’ meetings convened in terms of the Listings Requirements must be held in person and cannot be held by means of a written resolution.

PART FOUR: DIRECTORSAuthority of the board, general powers and dutiesIn terms of section 66(1), the business and the affairs of the company is to be managed by or under the direction of the board. The board has the authority, subject to the Companies Act and the MoI, to exercise all of the powers and perform any of the functions of the company.

Directors may delegate or allocate to any one of their members such powers as vested in the director pursuant to the Companies Act or under the MoI, as they may deem fi t.

The directors may from time to time appoint managing or other Executive Directors as they think fi t and for a period as they think fi t. The remuneration payable to such managing and/or Executive Directors shall be determined by a disinterested quorum of the directors or a committee of the board constituted for the purposes of determining such remuneration.

Composition of the board and election of directorsThe board shall comprise not less than four directors. No director may be appointed for life or for an indefi nite period.

All directors and alternate directors: (i) will be elected by ordinary resolution at any shareholders meeting or AGM; and (ii) Non-Executive Directors are required to rotate in accordance with the provisions of the MoI.


Annexure A – Summary of salient features of MoI (continued)

An individual may be appointed as an alternate director to more than one director. The board may appoint an individual who satisfi es the requirements for election as a director to fi ll any vacancy and serve as a director on a temporary basis.

Directors’ meetingsThe directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings as they think fi t. Any one director is authorised to call a meeting of the board.

Directors’ meetings may be conducted by electronic communication. No directors’ meeting may be convened without notice to all of the directors. A directors’ meeting may, under certain circumstances, proceed even if the company failed to give the required notice of a directors’ meeting, or there was a defect in the giving of the notice (in very limited circumstances).

A majority of directors must be present at the meeting before a vote may be called at that directors’ meeting. A directors’ meeting shall continue to be quorate notwithstanding that any one or more directors might, after quorum has been established, cease to be present at the meeting provided that no matter may be raised or dealt with at any such directors’ meeting, at which a quorum was present at the start of the directors’ meeting, unless the same forms the subject matter of the agenda for such directors’ meeting.

Each director shall have one vote on a matter before the board. The majority of the votes cast on a resolution is suffi cient to approve that resolution. A decision that could be voted on at a meeting may instead be adopted by written consent of the majority of the directors, provided that each person has received notice of the matter to be decided. The board must keep minutes of the meetings of the board in accordance with the Companies Act.

Chairperson of the boardThe board will be entitled to appoint any director as the Chairperson, deputy Chairperson and/or vice Chairperson and to determine the period for which they shall respectively hold offi ce. The Chairperson (deputy Chairperson and vice-Chairperson) shall not have a second or casting vote.

Directors’ compensationThe company may pay remuneration to its directors for their services as directors only in accordance with a special resolution approved within the last two years as more fully contemplated in section 5 66(8) and (9).

Committees of the boardThe board may appoint any number of committees of directors and may delegate to any committee any of the authority of the board. The board must, however, appoint a Remuneration Committee, Risk Committee, Nominations Committee, Social and Ethics Committee (unless exempt by the Companies Tribunal) and an Audit Committee.

PART FIVE: GENERAL PROVISIONSExtended accountability requirementsThe company must appoint a Company Secretary and an auditor.

DistributionsSubject to the Companies Act (particularly section 46), the Listings Requirements and the MoI, the board may: (i) declare any distributions; (ii) declare and pay interim distributions; and (iii) pay fi xed distributions. Payments to shareholders must be made in accordance with the Listings Requirements and must not provide that capital shall be repaid on the basis that it may be called up again. Unclaimed distributions or other monies must be retained indefi nitely and held in trust subject to the laws of prescription.

Financial assistanceThe board may, as contemplated in section 45, authorise the company to provide direct or indirect fi nancial assistance to, amongst others, a director or a prescribed offi cer of the company or a related or inter-related company.

Financial statements and access to fi nancial statementsThe company shall prepare annual fi nancial statements and have such annual fi nancial statements audited in accordance with the Companies Act.

A copy of the annual fi nancial statements, prepared in accordance with section 29(3), shall be distributed to those shareholders who have elected to receive notices at least 15 business days before the date of the AGM of the company at which such annual fi nancial statements will be presented.

Any person who holds a benefi cial interest in any securities issued by the company is entitled, without demand to receive notice of the publication of any annual fi nancial statements, setting out the steps required to obtain a copy of such statements and on demand, to receive without charge one copy of any annual fi nancial statements.

Odd-lot offersThe MoI includes provisions in accordance with the Listings Requirements relating to the right of the company to implement odd-lot offers.

NoticesThe MoI includes provisions relating to the giving of notices, circulars and other documents for meetings in accordance with the Companies Act. All notices and documents to be given by the company to any shareholder, director or other person shall be given in writing in any manner authorised by the Regulations, in particular Table CR3. Clause 52.9 and Annexure C (prescribed methods of delivery in the Regulations) of the MoI embody the same principles of deemed delivery of notices or documents by registered post, as is set out in the Regulations.


Morvest Business Group Limited(Incorporated in the Republic of South Africa)(Registration number 2003/012583/06)JSE code: MORISIN: ZAE000152567(“Morvest” or “the company”)

For use by holders of certifi cated Morvest ordinary shares or holders of dematerialised Morvest ordinary shares held through a Central Securities Depository Participant (“CSDP”) or broker and who have selected own-name registration, at the annual general meeting of the company to be held at 188 14th Road, Noordwyk, Midrand, 1685, at 10:00 on Friday, 29 November 2013.

Additional forms of proxy are available from the transfer secretaries of the company.

Not for use by holders of the company’s dematerialised ordinary shares who have not selected own-name registration.

The CSDP or broker, as the case may be, of dematerialised Morvest ordinary shareholders who have not elected own-name registration, should contact such Morvest ordinary shareholders to ascertain the manner in which they wish to cast their vote at the general meeting and thereafter cast their vote in accordance with their instructions. Such instructions should be communicated to the CSDP or broker, as the case may be, in terms of the agreement between the Morvest ordinary shareholder and his/her CSDP or broker. If such dematerialised Morvest ordinary shareholder concerned has not been contacted, it would be advisable for them to contact their CSDP or broker, as the case may be, and furnish them with their instructions. Dematerialised Morvest ordinary shareholders who are not own-name dematerialised Morvest ordinary shareholders and who wish to attend the general meeting must obtain their necessary letter of representation from their CSDP or broker, as the case may be, and submit same to Morvest’s transfer secretaries to be received by no later than at least 48 hours prior to the meeting. This must be effected in terms of the agreement entered into between the dematerialised Morvest ordinary shareholder and his/her/its CSDP or broker. If the CSDP or broker, as the case may be, does not obtain instructions from such dematerialised Morvest ordinary shareholder, they will be obliged to act in terms of the mandate furnished to them, or, if the mandate is silent in this regard, to abstain from voting.

I/We (names in block letters)

of (address in block letters)

being the holder/s of shares in the company do

hereby appoint of

or failing him/her of

or failing him/her the Chairman of the annual general meeting as my/our proxy to act for me/us at the annual general meeting of the company to be held at 188 14th Road, Noordwyk, Midrand, 1685, on Friday, 29 November 2013 at 10:00 and at any adjournment thereof, and to vote for me/us on my/our behalf in respect of the undermentioned resolutions.

Number of votes

For Against Abstain

Ordinary resolutions

1. To adopt the annual financial statements of the company for the year ended 31 May 2013, including the directors’ report and the report of the Audit and Risk Committee

2. To re-elect directors:

2.1. To re-elect A Mohammadali-Haji

2.2 To re-elect NY Mhinga

2.3 To re-elect Dr PS Molefe

3. To re-appoint Mazars (Gauteng) Inc. (previously PKF (Gauteng) Inc.) as the auditors and Manoj Manilal as the individual registered auditor and to fix their remuneration

4. To appoint members of the Audit and Risk Committee:

4.1 To appoint B Marx as a member of the Audit and Risk Committee

4.2 To appoint NY Mhinga as a member of the Audit and Risk Committee

4.3 To appoint A Mohammadali-Haji as a member of the Audit and Risk Committee

5. To allot and issue ordinary shares for cash

6. Approval of Remuneration Policy for Non-Executive Directors

7. To authorise the directors or the Company Secretary to sign documentation

Special resolutions

1. To give directors general authority to repurchase company shares

2. Authorise Morvest to provide direct or indirect financial assistance to one or more related or interrelated companies

3. Approve Non-Executive Directors’ remuneration

4. Approve and adopt new Memorandum of Incorporation

Please read notes on the reverse side hereof.

Signed at on the day 2013

Signature Assisted by (where applicable)

Form of proxy


Notes to the form of proxy

1. A Morvest shareholder may insert the name of a proxy or the names of two alternative proxies of the shareholder’s choice in the space. The person whose name stands fi rst on the form of proxy and who is present at the Morvest annual general meeting of shareholders will be entitled to act as proxy to the exclusion of those whose names follow.

2. A proxy appointed by a Morvest shareholder in terms hereof may not delegate his authority to act on behalf of the Morvest shareholder to any other person.

3. A Morvest shareholder’s instructions to the proxy must be indicated by means of a tick or a cross in the appropriate box provided. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from voting at the annual general meeting as he/she deems fi t in respect of all the Morvest shareholders’ votes exercisable thereat relating to the resolutions proposed in this form of proxy.

4. It is requested that forms of proxy be lodged at Computershare Investor Services Proprietary Limited, Ground Floor, 70 Marshall Street, Johannesburg, 2001 or posted to PO Box 61051, Marshalltown, 2107 so as to be at least 48 hours prior to the meeting. A Morvest shareholder shall never the less be entitled to ledge completed forms of proxy immediately prior to the commencement of the annual general meeting.

5. The completion and lodging of this form of proxy will not preclude the relevant Morvest shareholder from attending the annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such Morvest shareholder wish to do so. In addition to the aforegoing, a Morvest shareholder may revoke the proxy appointment by (i) cancelling it in writing, or making a later inconsistent appointment of a proxy; and (ii) delivering a copy of the revocation instrument to the proxy, and to the company. The revocation of a proxy appointment constitutes a complete and fi nal cancellation of the proxy’s authority to act on behalf of the Morvest shareholder as at the later of the date stated in the revocation instrument, if any; or the date on which the revocation instrument was delivered in the required manner.

6. The Chairman of the general meeting may reject or accept any form of proxy which is completed and/or received other than in compliance with these notes.

7. Any alteration to this form of proxy, other than a deletion of alternatives, must be initialled by the signatory/ies.

8. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form of proxy unless previously recorded by the company.

9. Where there are joint holders of Morvest shares: 9.1 any one holder may sign this form of proxy; and 9.2 the vote of the senior (for that purpose seniority will be determined by the order in which the names of

shareholders appear in the register of members) who tenders a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint holder(s) of Morvest shares.

10. This form of proxy may be used at any adjournment or postponement of the annual general meeting, including any postponement due to a lack of quorum, unless withdrawn by the Morvest shareholder.


King III checklist

Principlenumber Description Detail and compliance

1.1 The board should provide effective leadership based on an ethical foundation.

A Social and Ethics Committee reports to the board.

A Code of Conduct and Code of Ethics are in place.

A Whistleblower Policy is in place.

1.2 The board should ensure that the company is and is seen to be a responsible corporate citizen.

CSI initiatives are a focus for the board.

A comprehensive CSI initiative is in place.

A comprehensive environmental SHEQ policy is in place.

Morvest is committed to supporting entrepreneurship within the community.

1.3 The board should ensure that the company’s ethics are managed effectively.

Codes are reviewed annually and reports made to the board.

Employees and management are bound by, and reviewed in terms of, the codes and policies.

2.1 The board should act as the focal point for and custodian of corporate governance.

The board is the focal point and custodian of corporate governance at Morvest. In accordance with the Board Charter it is committed to the highest standards of corporate governance.

2.2 The board should appreciate that strategy, risk, performance and sustainability are inseparable.

The board, in accordance with the Board Charter, and all committee terms of reference reviewed in line with King III, is responsible for aligning the strategic objectives, vision and mission with performance and sustainability considerations. The board is responsible for ensuring the integrity of the Group’s risk management policies and procedures and internal controls.

2.3 The board should provide effective leadership based on an ethical foundation.

The board provides effective leadership and is committed to the highest levels of corporate governance as a key driver of sustainability.

2.4 The board should ensure that the company is and is seen to be a responsible corporate citizen.

See 2.1 above.

2.5 The board should ensure that the company’s ethics are managed effectively.

The board has established a Social and Ethics Committee, which is tasked with ensuring that the company’s ethics are managed effectively. Two Codes are in place to ensure ethical behaviour at board level and throughout the Group: Code of Conduct and Code of Ethics.

2.6 The board should ensure that the company has an effective and independent Audit Committee.

The board is satisfied that the Audit and Risk Committee is effective. The committee is chaired by an Independent Non-Executive Director. It further consists of two Independent Non-Executive Directors. All members are suitably qualified chartered accountants and/or experienced business leaders.

2.7 The board should be responsible for the governance of risk.

The board’s Audit and Risk Committee has conducted an evaluation of risk and is satisfied with the effective management of risk.

2.8 The board should be responsible for information technology (“IT”) governance.

The Audit and Risk Committee is responsible for IT governance. An IT steering committee, headed by the Group IT manager, is tasked with reviewing ongoing business requirements within the areas of IT, software and technological and physical infrastructure as well as business continuity plans and reporting to the board.


King III checklist (continued)


2.9 The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards.

The board is satisfied that the Audit and Risk Committee ensures that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards.

2.10 The board should ensure that there is an effective risk-based internal audit.

An internal audit function is in place. Together with the Audit and Risk Committee the internal audit function ensures the system of internal control and risk management processes are effective.

2.11 The board should appreciate that stakeholders` perceptions affect the company’s reputation.

The board recognises the importance of developing and nurturing positive and stable relationships with key stakeholders as a key driver of business success. (See page 16.)

2.12 The board should ensure the integrity of the company’s integrated annual report.

The board through the Audit and Risk Committee continues to ensure that the integrated annual report endeavours to provide a true view of the company’s commitment that financial, social and environmental sustainability permeate the entire business.

2.13 The board should report on the effectiveness of the company’s system of internal controls.

The board through the Audit and Risk Committee continuously ensures the soundness of the company’s system of internal controls, which are deemed to be effective.

2.14 The board and its directors should act in the best interests of the company.

The board acknowledges its role as a trustee on behalf of the shareholders.

2.15 The board should consider business rescue proceeding or other turnaround mechanisms as soon as the company is financially distressed as defined in the Act.

The board monitors the company’s solvency and liquidity. Business rescue has not been required.

2.16 The board should elect a Chairman of the board who is an Independent Non-Executive Director. The CEO of the company should not also fulfil the role of Chairman of the board.

The Chairperson, Dr PS Molefe, is an Independent Non-Executive Director and the roles of CEO and Chair are clearly defined.

2.17 The board should appoint the CEO and establish a framework for the delegation of authority.

The board has appointed MS Varachia as CEO and a delegation of authority framework is reviewed regularly.

2.18 The board should comprise a balance of power, with a majority of Non-Executive Directors. The majority of Non-Executive Directors should be independent.

The composition of the board complies with the requirement that 50% of the board be Independent Non-Executive Directors.

2.19 Directors should be appointed through a formal process.

The board appointment process is formal and transparent. The board as a whole is responsible for the appointment of new directors.

2.20 The induction of and ongoing training and development of directors should be conducted through formal processes.

The board has established a formal orientation programme to familiarise incoming directors with company operations, senior management and its business environment, and to induct them in their fiduciary duties and responsibilities.

2.21 The board should be assisted by a competent, suitably qualified and experienced Company Secretary.

The board has assessed and is satisfied with the competency, qualifications and experience of the Company Secretary, Noelene January.



2.22 The evaluation of the board, its committees and the individual directors should be performed every year.

All board members are required to complete annual self-assessments. The Company Secretary conducts annual evaluations of the board and the committees.

2.23 The board should delegate certain functions to well-structured committees but without abdicating its own responsibilities.

The board delegates certain functions without abdicating its own responsibilities to the following committees (see page 32): • EXCO• Audit and Risk Committee• Remuneration Committee• Social and Ethics Committee

2.24 A governance framework should be agreed between the Group and its subsidiary boards.

Governance principles at group level are implemented and monitored at subsidiary level.

2.25 Companies should remunerate directors and executives fairly and responsibly.

The Group’s remuneration policy and directors’ remuneration is set out in the integrated report (see pages 38 and 121).

2.26 Companies should disclose the remuneration of each individual director and certain senior executives.

See Principle 2.25.

2.27 Shareholders should approve the company’s Remuneration Policy.

A resolution to approve the Remuneration Policy is included in the notice of annual general meeting.

3.1 The board should ensure that the company has an effective and independent Audit Committee.

Independent Non-Executive Director Prof Marx chairs the Audit and Risk Committee, which further comprises two independent non-executive directors.

3.2 Audit committee members should be suitably skilled and experienced Independent Non-Executive Directors.

Members of the Audit Committee are all suitably skilled and experienced Independent Non-Executive Directors in accordance with the Companies Act.

3.3 The Audit Committee should be chaired by an Independent Non-Executive Director.

Independent Non-Executive Director, Prof Marx, chairs the Audit and Risk Committee.

3.4 The Audit Committee should oversee integrated reporting.

The board’s Audit and Risk Committee oversees integrated reporting and is responsible for the integrity of the integrated report.

3.5 The Audit Committee should ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities.

The Audit and Risk Committee ensures that a combined assurance model is applied to provide a coordinated approach to all assurance activities by management, internal and external audit.

3.6 The Audit Committee should satisfy itself of the expertise, resources and experience of the company’s finance function.

The CFO, Suren Singh, has over 25 years’ experience in leadership positions at several large companies, especially within the ICT and financial services sectors.

3.7 The Audit Committee should be responsible for overseeing of internal audit.

The internal audit function is governed by an Internal Audit Charter. The Audit and Risk Committee manage the process.

3.8 The Audit Committee should be an integral component of the risk management process.

The Audit and Risk Committee are directly responsible for risk management.




3.9 The Audit Committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process.

The board, assisted by the Audit and Risk Committee, meets regularly with the external auditors and formally evaluates their independence on an annual basis.

3.10 The Audit Committee should report to the board and shareholders on how it has discharged its duties.

The Audit and Risk Committee regularly reports to the board.

4.1 The board should be responsible for the governance of risk.

The Audit and Risk Committee report to the board, who take responsibility for risk management and strategy.

4.2 The board should determine the levels of risk tolerance.

Based on identified risk, the board assigns a risk tolerance level.

4.3 The Risk Committee or Audit Committee should assist the board in carrying out its risk responsibilities.

The Audit and Risk Committee report to the board, who take responsibility for risk management and strategy.

4.4 The board should delegate to management the responsibility to design, implement and monitor the risk management plan.

The day-to-day responsibility for risk management remains with management both at an operational and Group executive level.

4.5 The board should ensure that risk assessments are performed on a continual basis.

The Audit and Risk Committee ensures that risk management assessments are performed on a continuous basis.

4.6 The board should ensure that the frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks.

The Audit and Risk Committee monitors the implementation of the policy and plan for risk management taking place by means of risk management systems and processes.

4.7 The board should ensure that management considers and implements appropriate risk responses.

The Audit and Risk Committee ensures that management considers and implements appropriate risk responses.

4.8 The board should ensure continual risk monitoring by the management.

Through the Audit and Risk Committee the board ensures that continuous risk monitoring by management takes place.

4.9 The board should receive assurance regarding the effectiveness of the risk management process.

The company’s risk management process identifies, assesses and monitors risks. The Audit and Risk expresses its view to the board on the effectiveness of the system and process of risk management.

4.10 The board should ensure that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders.

There is ongoing two-way communication with stakeholders. In addition, the integrated annual report fully discloses all risk.

5.1 The board should be responsible for information technology (IT) governance.

The Audit and Risk Committee manage IT governance and an IT Governance Charter is in place.

5.2 IT should be aligned with the performance and sustainability objectives of the company.

The Audit and Risk Committee ensure that the IT is aligned with the overall objectives of the company.



5.3 The board should delegate to management the responsibility for the implementation of an IT governance framework.


5.4 The board should monitor and evaluate significant IT investments and expenditure.

The Audit and Risk Committee reports to the board on significant IT investments and expenditure.

5.5 IT should form an integral part of the company’s risk management.


5.6 The board should ensure that information assets are managed effectively.

Management of information assets is incorporated into the overall risk management profile.

5.7 A Risk Committee and Audit Committee should assist the board in carrying out its IT responsibilities.


6.1 The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards.

The Company Secretary and CLO, together with key management, monitor the Group’s compliance with JSE Listings Requirements, the Companies Act, and other applicable legislation. All subsidiaries report compliance issues to the Company Secretary and CLO, who then reports to the board.

6.2 The board and each individual director should have a working understanding of the effect of the applicable laws, rules, codes and standards on the company and its business.

The Company Secretary ensures the ongoing training of and knowledge sharing with the board and individual directors.

6.3 Compliance risk should form an integral part of the company’s risk management process.

Legislative issues are an identified significant risk and addressed as part of the risk management process.

6.4 The board should delegate to management the implementation of an effective compliance framework and processes.

The Company Secretary and Chief Legal Officer, together with key management, compiles an annual checklist to monitor the Group’s compliance with the JSE Listings Requirements, the Companies Act and other applicable legislation. Subsidiaries report all compliance issues to the Company Secretary who together with the Chief Legal Officer, then reports to the board in this regard.

7.1 The board should ensure that there is an effective risk-based internal audit.


7.2 Internal audit should follow a risk based approach to its plan.

Internal audit follows a risk-based approach in accordance with the Internal Audit Charter.

7.3 Internal audit should provide a written assessment of the effectiveness of the company’s system of internal control and risk management.

Internal audit provide a written assessment to the Audit and Risk Committee.

7.4 The Audit Committee should be responsible for overseeing internal audit.





7.5 Internal audit should be strategically positioned to achieve its objectives.

The internalised internal audit managed by the Audit and Risk Committee ensures this. Refer to Principle 2.11.

8.1 The board should appreciate that stakeholders perception affect a company’s reputation.

Morvest engages with stakeholders in terms of the Group’s Stakeholder Management Policy which focuses on ongoing two way communication.

8.2 The board should delegate to management to proactively deal with stakeholder relationships.

This process is managed through the Stakeholder Management Policy.

8.3 The board should strive to achieve the appropriate balance between its various stakeholder groupings, in the best interests of the company.

The appropriate balance is assessed on a regular basis, with assistance from the Company Secretary and outside advisors where appropriate.

8.4 Companies should ensure the equitable treatment of shareholders.

Shareholders are treated equitably in accordance with various laws and regulations which protect minority interests.

8.5 Transparent and effective communication with stakeholders is essential for building and maintaining their trust and confidence.

Morvest engages with stakeholders in terms of the Group’s Stakeholder Management Policy which focuses on ongoing two way communication.

8.6 The board should ensure that disputes are resolved as effectively, efficiently and expeditiously as possible.

Disputes with stakeholders are addressed in the appropriate forum and steps taken to ensure that any disputes are resolved effectively, efficiently and expeditiously. A grievance policy is in place.

9.1 The board should ensure the integrity of the company’s integrated report.

The board’s Audit and Risk Committee oversees integrated reporting and is responsible for the integrity of the integrated annual report.

9.2 Sustainability reporting and disclosure should be integrated with the company’s financial reporting.

The company’s vision and mission statements, strategic objectives and value system are integrated into all policies, procedures, decision making and operations, with sustainability as the ultimate objective.

9.3 Sustainability reporting and disclosure should be independently assured.

Sustainability reporting and disclosure are independently assured.


GRI index

Morvest is committed to the G3.1 Guidelines, which continues to provide a valuable framework for citizenship reporting. Our 2013 sustainability reporting applies a self-declared GRI Application Level C.

G3 Indicator Description Page

Strategy 1.1 Statement from the most senior decision maker of the organisation (eg Chief Executive Officer, Chair, or equivalent senior position) about the relevance of sustainability to the organisation and its strategy.

22 – 29

1.2 Description of key impacts, risks, and opportunities. 12 – 15,32 – 37

Organisational profile

2.1 Name of the organisation. OFC

2.2 Primary brands, products, and/or services indicating the nature of its role in providing these products and services and the degree to which it utilises outsourcing.

3, 6 – 10

2.3 Operational structure of the organisation, including main divisions, operating companies, subsidiaries and joint ventures.

6 – 13

2.4 Location of organisation’s headquarters. IBC

2.5 Number of countries where the organisation operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report.

6 – 10

2.6 Nature of ownership and legal form. 3, 6 – 10

2.7 Markets served (including geographic breakdown, sectors served and types of customers/beneficiaries).

6 – 10

2.8 Scale of the reporting organisation. 2, 6 – 10, 26 – 29

2.9 Significant changes during the reporting period regarding size, structure, or ownership.

3

2.10 Awards received in the reporting period. 1

Report parameters

3.1 Reporting period (eg fiscal/calendar year) for information provided. 3

3.2 Date of most recent previous report (if any). 3

3.3 Reporting cycle (annual, bi-annual, etc). 3

3.4 Contact point for questions regarding the report or its contents. 3

3.5 Process for defining report content, including:• determining materiality;• prioritising topics within the report; and• identifying stakeholders the organisation expects to use the report.

IFC, 3 – 4,

12 – 13, 14 – 15

3.6 Boundary of the report (eg countries, divisions, subsidiaries, leased facilities, joint ventures and suppliers).

3

3.7 State any specific limitations on the scope or boundary of the report. 3

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations and other entities that can significantly affect comparability from period to period and/or between organisations.

3

3.9 Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the indicators and other information in the report.

Applied throughout

the report


GRI index (continued)


Report parameters(continued)

3.10 Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement.

3

3.11 Significant changes from previous reporting periods in the scope, boundary or measurement methods applied in the report.

3

3.12 GRI table. 145 – 151

3.13 Policy and current practice with regard to seeking external assurance for the report.

3

Governance, commitments and engagements

4.1 Governance structure of the organisation, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organisational oversight.

12 – 13, 32 – 36

4.2 Indicate whether the Chairman of the highest governance body is also an executive officer and, if so, reasons for this arrangement.

20 – 21

4.3 Number of independent and/or non-executive members. 20 – 21

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the board.

16 – 17, 34, 41

4.5** Linkage between compensation for members of the highest governance body, senior managers and executives and the organisation’s performance.

38

4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided.

32 – 36

4.7** Process for determining the qualifications and expertise of the members of the highest governance body for guiding the organisation’s strategy on economic, environmental, and social topics.

32 – 36

4.8 Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation.

6 – 13, 29

4.9 Procedures of the highest governance body for overseeing the organisation’s identification and management of economic, environmental and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct and principles.

32 – 36, 37

4.10 Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental, and social performance.

32 – 36

4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organisation.

10, 32 – 36

4.12** Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organisation subscribes or endorses.

3, 32 – 36, 41 – 50,

51 – 52, 53

4.13 Memberships in associations (such as industry associations) and/or national/international advocacy organisations.

16 – 17, 47

4.14 List of stakeholder groups engaged by the organisation. 16 – 17

4.15 Basis for identification and selection of stakeholders with whom to engage. 16 – 17

4.16 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group.

16 – 17



Governance, commitments and engagements(continued)

4.17 Key topics and concerns that have been raised through stakeholder engagement, and how the organisation has responded to those key topics and concerns, including through its reporting.

16 – 17

Disclosures on Management Approach*

DMA EN

The disclosures on management approach for all environmental aspects reported on.

Not addressed

DMA HR

The disclosures on management approach relating to human rights reported on.

Not addressed

DMA LA

The disclosures on management approach relating to labour practices and decent work reported on.

Not addressed

DMA SO

The disclosures on management approach relating to society reported on. Not addressed

DMA PR

The disclosures on management approach relating to individual aspects reported on: PR1, PR2 – Product health and safety impacts; andPR4, PR5, PR8 – Customer satisfaction and privacy of data and non-compliance with regulations.

Not addressed

DMA EC

The disclosures on management approach relating to the individual aspects reported on, including: EC1 – Direct economic value generated and distributed;EC2 – Impacts of climate change;EC6 – Spending on locally-based suppliers;EC7 – Local hiring, including at senior management level; andEC8, EC9 – Economic impacts.

Not addressed

* Disclosure on management’s approach is included throughout the integrated annual report** Partial compliance

Performance indicator: Environmental

EN1 Materials used by weight or volume. Not addressed

EN2 Percentage of materials used that are recycled input materials. 53

EN3 Direct energy consumption by primary energy source. Not addressed

EN4 Indirect energy consumption by primary source. Not addressed

EN5 Energy saved due to conservation and efficiency improvements. Not addressed

EN6 Initiatives to provide energy-efficient or renewable energy-based products and services and reductions in energy requirements as a result of these initiatives.

Not addressed

EN7 Initiatives to reduce indirect energy consumption and reductions achieved. Not addressed

EN8 Total water withdrawal by source. Not addressed

EN9 Water sources significantly affected by withdrawal of water. Not addressed

EN10 Percentage and total volume of water recycled and reused. Not addressed




Performance indicator: Environmental

EN11 Location and size of land owned, leased, managed in or adjacent to protected areas and areas of high biodiversity value outside protected areas.

Not addressed

EN12 Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas.

Not addressed

EN13 Habitats protected or restored. Not addressed

EN14 Strategies, current actions and future plans for managing impacts on biodiversity.

Not addressed

EN15 Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk.

Not addressed

EN16 Total direct and indirect greenhouse gas emissions by weight. Not addressed

EN17 Other relevant indirect greenhouse gas emissions by weight. Not addressed

EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved. Not addressed

EN19 Emissions of ozone-depleting substances by weight. Not addressed

EN20 NO, SO, and other significant air emissions by type and weight. Not addressed

EN21 Total water discharge by quality and destination. Not addressed

EN22 Total weight of waste by type and disposal method. Not addressed

EN23 Total number and volume of significant spills. Not addressed

EN24 Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally.

Not addressed

EN25 Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organisation’s discharges of water and run-off.

Not addressed

EN26 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation.

Not addressed

EN27 Percentage of products sold and their packaging materials that are reclaimed by category.

Not addressed

EN28 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations.

36

EN29 Significant environmental impacts of transporting products and other goods and materials used for the organisation’s operations, and transporting members of the workforce.

Not addressed

EN30 Total environmental protection expenditures and investments by type. Not addressed



Performance indicator: Human rights

HR1 Percentage and total number of significant investment agreements that include human rights clauses or that have undergone human rights screening.

Not addressed

HR2 Percentage of significant suppliers and contractors that have undergone screening on human rights and actions taken.

Not addressed

HR3 Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained.

Not addressed

HR4 Total number of incidents of discrimination and actions taken. 44

HR5 Operations identified in which the right to exercise freedom of association and collective bargaining may be at significant risk, and actions taken to support these rights.

Not addressed

HR6 Operations identified as having significant risk for incidents of child labour, and measures taken to contribute to the elimination of child labour.

Not addressed

HR7 Operations identified as having significant risk for incidents of forced or compulsory labour, and measures to contribute to the elimination of forced or compulsory labour.

Not addressed

HR8 Percentage of security personnel trained in the organisation’s policies or procedures concerning aspects of human rights that are relevant to operations.

Not addressed

HR9 Total number of incidents of violations involving rights of indigenous people and actions taken.

Not addressed

Performance indicator: Labour practices and decent work

LA1 Total workforce by employment type, employment contract and region. 41 – 43

LA2** Total number and rate of employee turnover by age group, gender and region.

41 – 43

LA3 Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations.

41 – 43,46 – 47

LA4 Percentage of employees covered by collective bargaining agreements. 47

LA5 Minimum notice period(s) regarding operational changes, including whether it is specified in collective agreements.

Not addressed

LA6 Percentage of total workforce represented in formal joint management – worker health and safety committees that help monitor and advise on occupational health and safety programmes.

Not addressed

LA7** Rates of injury, occupational diseases, lost days and absenteeism, and number of work-related fatalities by region.

46 – 47

LA8 Education, training, counselling, prevention and risk control programmes in place to assist workforce members, their families, or community members regarding serious diseases.

46 – 47

LA9 Health and safety topics covered in formal agreements with trade unions. Not addressed

LA10 Average hours of training per year per employee by employee category. Not addressed

LA11** Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings.

Not addressed



Performance indicator: Labour practices and decent work(continued)

LA12 Percentage of employees receiving regular performance and career development reviews.

44

LA13** Composition of governance bodies and breakdown of employees per category according to gender, age group, minority group membership and other indicators of diversity.

20 – 21, 41 – 43, 51 – 52

LA14 Ratio of basic salary of men to women by employee category. Not addressed

** Partial compliance

Performance indicator: Society

SO1 Nature, scope and effectiveness of any programmes and practices that assess and manage the impacts of operations on communities, including entering, operating and exiting.

Not addressed

SO2 Percentage and total number of business units analysed for risks related to corruption.

Not addressed

SO3** Percentage of employees trained in organisation’s anti-corruption policies and procedures.

Not addressed

SO4 Actions taken in response to incidents of corruption. Not addressed

SO5 Public policy positions and participation in public policy development and lobbying.

Not addressed

SO6 Total value of financial and in-kind contributions to political parties, politicians and related institutions by country.

Not addressed

SO7 Total number of legal actions for anti-competitive behaviour, anti-trust and monopoly practices and their outcomes.

36

SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations.

36

Performance indicator: Product Responsibility

PR1 Life cycle stages in which health and safety impacts of products and services are assessed for improvement and percentage of significant products and services categories subject to such procedures.

Not addressed

PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes.

36

PR3 Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements.

Not addressed

PR4 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling, by type of outcomes.

36

PR5** Practices related to customer satisfaction, including results of surveys measuring customer satisfaction.

16 – 17

PR6 Programmes for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion and sponsorship.

Not addressed

PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion and sponsorship by type of outcomes.

36




Performance indicator: Product Responsibility(continued)

PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data.

This table

PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services.

36

Performance indicator: Economic

EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings and payments to capital providers and governments.

40

EC2 Financial implications and other risks and opportunities for the organisation’s activities due to climate change.

Not addressed

EC3 Coverage of the organisation’s defined benefit plan obligations. 46 – 47

EC4 Significant financial assistance received from government. Not addressed

EC5 Range of ratios of standard entry-level wage compared to local minimum wage at significant locations of operation.

Not addressed

EC6 Policy, practices and proportion of spending on locally-based suppliers at significant locations of operation.

51

EC7** Procedures for local hiring and proportion of senior management hired from the local community at locations of significant operation.

44, 51

EC8 Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind or pro bono engagement.

Not addressed

EC9 Understanding and describing significant indirect economic impacts, including the extent of impacts.

51

** Partial compliance


Contact information

• Gauteng 188 14th Road

NoordwykMidrand Tel: +27 11 231 1300

Bruma Ground fl oorH. Santos Building30 Arena CloseBrumaTel: +27 11 856 4400

Centurion 42 Oak Avenue

Building 4Highveld Techno ParkCenturion Tel: +27 12 686 8800

53 Adriana CrescentAgnone HouseGateway ParkCenturion Tel: +27 12 661 7903

Midrand 146 Lechwe Street

Corporate Park SouthMidrandTel: +27 87 803 4440

• Western Cape Cape Town Cape Town Print Park

Burmingham CloseAirport Industria NorthTel: +27 21 935 6500

5th FloorCentral ParkBlack River Park2 Fir RoadObservatoryTel: +27 21 448 6788

Mossel BayOffi ce 107A, First FloorPlaza Aquada, Mossel Bay

• Eastern Cape Port St Francis Shop No 6

Port St Francis Harbour

Port Elizabeth 100B Cape Road

Port Elizabeth

Greenways Offi ce Parkc/o Buffelsfontein and Melsetter RoadMount PleasantPort ElizabethTel: +27 41 360 0144

Eyethu FishingOld Tug WarfPort Elizabeth Harbour

Thombo Tambo CentrePort St JohnsTel: +27 47 564 9171

• Limpopo Polokwane 29A Biccard Street

PolokwaneTel: +27 15 291 1358

• KwaZulu-Natal Durban Aloe Offi ce 4

Sanyati Offi ce Park3 Abrey Road, KloofTel: +27 31 764 7299

Umhlanga Ridge 124/125 Il Palazzo

5 Zenith DriveUmhlanga RidgeTel: +27 31 566 1105

• Free State Bloemfontein Beljac Building

131 Zastron StreetBloemfonteinTel: +27 51 430 1879

85 President Reitz AvenueReitz Park Unit 4WestdeneBloemfonteinTel: +27 51 448 6419

• Northern Cape Kimberley 2 Holland Road

New ParkKimberleyTel: +27 53 832 5891

• Mpumalanga Nelspruit 28 Van Rensburg Street

Unit 19 Lisa’s CourtNelspruit

* For each regional offi ce the majority of employees are local to that offi ce

Dubai, UAEMorvest is in the process of establishing offi ces in Dubai, UAE. These offi ces are to be the base for our international expansions, which are expected to start contributing to revenue in the next fi nancial year across all three reportable segments.

South Africa

MozambiqueRua da Tchamba, 342 Maputo(Business Support Services)Amount of staff: 4

Nigeria15A Kudirat Abiola WatOregun, Ikeja(Business Support Services and ICT Solutions)Amount of staff: 44

Corporate information

Company registration number2003/012583/06

Country of incorporationSouth Africa

ISIN code ZAE 000152567

Share codeMOR

Executive DirectorsMS Varachia (Chief Executive Offi cer)S Singh (Chief Financial Offi cer)M Papiyana (Group HR Director)A Evan (Chief Legal Offi cer)

Independent Non-Executive DirectorsPS Molefe (Chairman)B MarxNY MhingaA Mohammadali-Haji

Registered offi ce and business address188 4th Road, Noordwyk, Midrand, 1685PO Box 4307, Halfway House, 1685

Tel: +27 11 231 1300Fax: +27 11 234 8023

Preparer of fi nancial statementsChief Financial Offi cerS Singh (MBA, MITM, CIS, ABP)

Company SecretaryNoelene JanuaryMorvest Business Group Limited 188 4th Road, Noordwyk, Midrand, 1685PO Box 4307, Halfway House, 1685Tel: +27 11 231 1300Fax: +27 11 234 8023

Auditors Mazars (Gauteng) Inc. previously PKF (Gauteng) Inc.Erasmus Forum A434 Rigel Avenue South, ErasmusrandPretoria, 0181Tel: +27 12 347 3820Fax: +27 12 347 3737

EnquiriesEnquiries relating to shares should be directed to the transfer secretaries.

Enquiries relating to the company should be directed to the Company Secretary.

Transfer secretariesComputershare Investor Services Proprietary Ltd70 Marshall Street, Johannesburg, 2001PO Box 61051 Marshall Town 2107Tel: +27 11 370 5000Fax: +27 11 688 5248

SponsorSasfi n Capital, a division of Sasfi n Bank LimitedRegistration number: 1951/002280/0629 Scott Street, Waverly 2090Johannesburg, PO Box 95104Grant Park 2051

Commercial bankersFirst National Bank (A division of First Rand Bank Limited)(Registration number 1966/010753/06)267 AFGRI Building, Ground Floor, Centurion, 0157Tel: +27 12 643 7758Fax: 086 540 7751

Nedbank Limited(Registration number 1951/000009/06)Nedbank House12 Fredman Drive, Sandown 2196(PO Box 1147 Sandton 2146)Tel: +27 11 294 0111Fax: +27 11 294 0111

Mo

rvest Integrated R

eport 2013

Morvest Centurion

Tel +27 12 665 4245/6/7Fax +27 86 676 2400

Physical address42 Oak Avenue, Highveld Techno Park, Centurion, 0169

Postal addressPO Box 10043, Centurion, 0046

Head Offi ce

Tel +27 11 231 1300Fax +27 11 234 8023

Physical address188, 14th Road, Noordwyk, Midrand, 1685

Postal addressPO Box 4307, Halfway House, 1685

Morvest Cape Town

Tel +27 935 6500Fax +27 935 6540

Physical addressBirmingham Close,Airport Industria North,Cape Town, 7490

Postal addressPO Box 16130, Panorama, 7500

Morvest Nigeria

Physical address15 Kudirat Abiola Way (Formerly Oregun Road), Oregun, Ikeja, Lagos, Nigeria

www.morvest.co.za

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Documents

Integrated Report 2013 - JSE€¦ · Group profile 6 Our geographic footprint 7 Group snapshot 8 Living our values 10 Our strategy 11 Our strategy 12 Material issues 14 Stakeholder